How to Guard Against Outliving Your Retirement Savings

With so much up in the air these days, the majority of Americans are worried not only about their health, but also about their financial well-being. But while virtually all of us are facing circumstances we haven’t seen in our lifetimes, as a wealth advisor, the concerns I hear about from my retired clients, friends, and family are akin to those I’ve heard throughout my career. More than anything, they are worried about outliving their money.

It’s certainly a reasonable fear, particularly when markets are volatile and daily updates on the pandemic only emphasize that there are no guarantees in life. But that doesn’t mean you don’t have control over what happens to your money. In fact, most of the time, it comes down to a somewhat unsexy—but essential—skill: budgeting.

Many people don’t have a good handle on how much they spend—especially those who have some discretionary income. Just think about it: Do you know how much you spend each week on coffee, takeout, the occasional bottle of wine? Often, those are just a few of the regular expenditures people make without much thought. Now, think about the bigger-ticket items: high-end gifts, vacations—even homes. If you have the cash—or credit—right now, it’s easy to make these purchases without considering their long-term impact.

But we know that people are living longer than ever before, and that means most of us will spend far more time in retirement than the generations that came before us. In addition, though our lifespans have increased, many of us will still face the health challenges that come with old age—from slip-and-fall injuries to cancer. Unfortunately, those challenges come with a price tag as well. If you’ve never looked at the cost of long-term care facilities or a home health aid, take some time to do so now. You’ll see that it may be more than you’ve bargained—or budgeted—for. And with constant reminders that we can’t possibly predict the future, the time to get a handle on your retirement savings—and a plan that prioritizes financial longevity—is now.

Some are comforted by the concept of an itemized budget, a document dictating exactly how much they should spend on the various aspects of their lives, from housing to happy hours. If that works for you, go for it! But for others who are overwhelmed or unenthusiastic about documenting the direction of every penny they have, creating broad strokes may be good enough. The goal is to have guidelines on how much you spend in different areas.

Look at how much you’ve saved to begin with. (if you’re still working, this may be a good time to consider adding more to your retirement accounts if you’re not yet maxing out your contributions). Next, think about the longest amount of time you may realistically live. From there, you’ll get a rough idea of what you can comfortably afford to spend each year. Again, keep in mind that you never know when an expensive issue may arise, so factor that into your allotted spending as well.

Now, it’s time to think about the categories into which your current and future expenses may fall: housing and utilities, food, entertainment, health care, travel, etc. Ask yourself approximately how much you currently spend on each, and how that may change in the future. For example, do you expect your housing expenses to be reduced because you plan to sell your four-bedroom home and relocate to a condo once your youngest child leaves for college? Do you expect travel expenses to go up when you retire from your full-time job and begin island hopping each winter? Will your health care expenses likely grow as your spouse’s degenerative disease worsens? Or are you planning to foot the bill for a grandchild’s private education, taking on a new financial responsibility? These anticipated life changes should be factored into your budget as well.

You may find, too, that your budget itself dictates a change. Perhaps you can’t indulge the way you once planned to during retirement, or maybe the opposite is true: you find you’ve been more frugal than necessary. The bottom line is, when you know where you are–and where you might be headed–you’re far more likely to arrive at your ideal destination. And if you’re unsure about where that is, check out my book, You’re Retired… Now What?


The First Rule of Managing Your Retirement Fund in a Pandemic? Don’t Panic.

You don’t need me to tell you that these are uncertain and unprecedented times; I’m sure you feel it yourself everyday, as you talk to friends and family—virtually or from a distance, of course; watch the news and social media; and yes, check your retirement accounts. No one knows what the next few days, weeks, months, or even years may bring. Many signs point to an ongoing struggle as we face a novel foe in the form of COVID-19—at least for the time being.

The markets reflect much of our anxiety about what the future holds for our health, our safety, and our wallets. When you see the drop in value of your 401(k), caused by a COVID-19-driven market, you may feel all the symptoms of a panic attack coming on: rapid pulse, sweaty palms, an overwhelming sense of dread, and more. In times like these, many consider liquidating their investments and moving what they have into a money market account, hoping to just wait it out and hold on to what hasn’t yet been depleted. I know how common this rationale is among investors because they call me.

I’ve been an independent wealth advisor for three decades now. I’m used to talking panicked clients off a ledge in what seems like the worst of times. I did it after 9/11, and again after the Tech Bubble burst. And I’ll tell you what I tell those clients when my phone rings, their worry almost palpable: this isn’t the time to lean in to that feeling.

I know it may feel like the world is disintegrating in front of your eyes. It may seem logical to hunker down with the acorns you still have and hope and pray that spring arrives soon. That may be a fine strategy for squirrels, but it’s not good for humans who have to pay for things with money—often for twenty or thirty years after they stop working.

We can turn to an old Wall Street adage for a better approach: Buy low and sell high. Why? When you sell low, you lock in any losses that you’ve experienced—permanently. Meanwhile, long-term investors know that volatility is an inherent part of investing. Markets go down, and they go up; it’s the nature of the game. Investors make decisions with this in mind. And now, when markets are down, is not the time to sell your equity investments. What should you do instead? Give your retirement investments time to recover.1

When your worries start to rack up and you feel an itch in that mouse-clicking trigger finger, consider taking a break from your regular media channels—and from checking your account retirement balances. I often tell clients that a little dispassion in a volatile market often helps their case, especially if they’re nearing retirement. Everything is temporary, and the more you can do to remind yourself of that, the better off you’ll be.

And though it may seem counterintuitive, this may actually be the perfect time to continue adding to your investments (something that happens automatically when you set up recurring payroll deductions), rather than pulling money out. Why? The drop in the market means you can get shares at a cheaper rate. In times like these, you end up getting more for your money—which could be a real boon when we return to some semblance of normalcy, sending moods and markets alike higher.

In addition, if you’re working with a competent advisor, he or she has taken steps to protect what you’ve worked so hard to acquire. Plus, while there are no guarantees in life, history has shown us time and again that economies operate cyclically. Lows are par for the course—but so are highs. In short, don’t panic. Eventually, we’ll get to the other side.

With that in mind, we can look to those acorn-hoarding squirrels for one important lesson worth noting: Oftentimes, a long, cold winter makes for an even sweeter spring.

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