At age 65, the average life expectancy is 81.8 years for a man and 84.8 years for a woman.
Those were the figures as of March 2006 from the National Center for Health Statistics.
But with advances in medical science, it’s no longer a stretch to think that you could live to be 100. That’s great news – unless you run out of money.
Consider the following hypothetical example, which assumes:
• You’re 64 years old and earn $60,000 per year.
• You plan to retire at age 65.
• You’ve accumulated $1,000,000, which you think will return 6% per year.
• You’ll need $60,000 a year in retirement, excluding Social Security.
The good news is that if you have a 15-year retirement, from age 65 to 80, you’ll end up with almost $696,000 to pass on to your heirs.
The bad news is that if you have a 30-year retirement, from age 65 to 95, you’ll run out of money at age 88. (See footnote.)
But don’t worry.
With careful planning, you can recover, even after a downturn such as that of the past year.
You can save more, invest more aggressively or work longer. In fact, working longer might be the best option. According to Financial Engines, 50-to-60-year-olds can get their retirement savings on track after recent stock market losses without any additional savings if they work just two or three more years.
(Footnote) Assumes $1,000,000 in retirement savings has already been accumulated; another $60,000 is added. The money grows at a hypothetical 6% per year; $60,000 (in today’s dollars) is withdrawn each year. The example cited is hypothetical and for illustrative purposes only. It is not meant to represent performance of any particular product.