THE MONEY MINUTE: Attention retirees! Will you outlive your money?

by Jac M. Arbour CFP®, ChFC®
President, J.M. Arbour Wealth Management

What is your largest concern about retirement? According to the Wall Street Journal, the number one fear/concern of a retiree is outliving his or her money (the second is requiring Long Term Care due to chronic illness). I have to admit, I understand both of these concerns.

According to most sources available to us today, the average amount of money a retiree has in investable assets the day he or she walks into retirement, is approximately $126,000. It is also estimated that someone retiring today will live an average of twenty five years in retirement. Couple these stats with the uncertainty one can experience in the form of market returns and it is no wonder why people are concerned about how long their money will last. So, what do you do?

In my opinion, the first thing you need to do is run the numbers and do the math. We must run our households like a business and know exactly how much is coming in and how much is going out each month. Second, take a hard look at upcoming capital expenditures and any potential changes in monthly cash flow. The idea here is to derive an accurate number as to how much money will be needed from investable assets in order to pay the bills. The smaller the amount needed, the longer your money will most likely last.

Some people have the ability to tolerate market risk and can stomach some losses when they occur. The contrary is also true. Some households cannot afford to lose five or ten percent of their account balances, never mind thirty-eight percent (which the S&P500 lost in 2008) in a single year.

What is more important to you at this point in your life: Return on Investment or … Reliability of Income? Maybe, just maybe, it is a combination of the two.

Call your advisor and ask questions that directly address your concerns. Determine your probability of success with regard to how long your money should last based on factors such as its current investment allocation and your annual withdrawal rate. Determine which safeguards should be considered and most important, which should be implemented.

Here is what I promise: When you have a clear idea about where it is you are going, it is more likely you will reach that destination.

See you all next month.

Jac Arbour CFP®, ChFC®

Jac Arbour is the President of J.M. Arbour Wealth Management and can be reached at 207-248-6767.
nvestment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.