Got a million? It may not be enough
A recent article in Medical Economics online newsletter says most baby boomers think they have enough money saved for retirement, but they probably don’t. Even if you have a million dollars, it may not be enough. You may have a house and a couple of cars, and some money in IRA’s, pension plans, and 401K’s. So why isn’t that enough?
Two reasons:
1. You will probably live longer than you think. I guess that’s good news, but not for your nest egg. The IRS Life Expectancy Table shows that a person currently aged 60 can expect to life, on average, another 25 years. So you might outlive your savings, if you have to start dipping in for living expenses too soon.
2. As we age, our bodies fall apart. Many of us are on maintenance drugs for high cholesterol . One out of every five boomers has diabetes, according to the National Diabetes Information Clearinghouse. We’re also more prone to those aches and pains (arthritis, etc.) All of these diseases cost money, further draining our savings. I don’t have to tell you about this, I’m sure. For those of you still in your 50’s, you have all of this fun stuff to look forward to.
I’m not touting any financial planning company. And I’m certainly not giving anyone advice. I just started reading and thinking and I decided to take a closer look at my own finances and my plans. Now is the time to consider these things before you decide to retire or before you decide to leave your company and start your own business.
You might want to look into annuities, or long-term care insurance. If you’re probably going to live another 25 years or so, consider more aggressive investing, instead of playing it safe. The traditional annual return on the stock market (adjusted for inflation) is about 7 percent. If you can do better than this, and if you don’t need the money right away, you can build up more savings over the next few years.
Consider buying or starting a business to give you enough money to hold off taking distributions from your IRA or 401K and to avoid taking social security.
You might want to investigate Financial Engines (www.financialengines.com/ an online service that allows you to input all of your personal financial information, investments, and assumptions (for a quarterly fee). They come up with advice on how to invest to maximize your goals. The larger investment services, like Schwab, have online retirement calculators, as do Fidelity and Vanguard. The free calculators, like this one from AG Edwards, are pretty simplistic. Spend the money and get some real thorough advice.
If you can’t sleep tonight, send me a comment.
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POSTED IN: Boomer Talk, Boomers nearing retirement, Finance
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