Concerns about how long retirement savings will last are common for those whose retirement is on a not-too-distant horizon. But what does retirement mean? Images of a rocking chair on a front porch or a hammock in the backyard belong to a bygone era. In a recent interview with Jack Nelson, CFP®, CRC®, senior vice president, Johnson Investment Services, he says, “Today's retirees are active, healthy, engaged, productive and purposeful.”
“Today's retirees are active, healthy, engaged, productive and purposeful.”
“And just as you're not going to be sitting back, doing nothing, your money can't either,” he says. “Once you reach retirement, your portfolio will need to be as actively managed as it was while you were building it.”
Nelson recommends these five steps for making your money last as long as you do:
“Many people have difficulty realizing what their retirement is going to look like,” Nelson comments. Many factors affect how much money you'll need: what you plan to do, where you plan to live, your general health and more. If you want to leave a legacy, that should be factored in as well. “Some people want to be generous to family members; others don't,” Nelson adds as an aside. “Unfortunately, those two types of people are often married to each other! Discussion is obviously critical for a satisfactory result.”
“If you haven't been actively engaged in managing your finances before retirement, now is the time to do it,” he says. Johnson Bank provides tools and resources to help, such as the Retirement Savings Longevity Calculator.
They can help you manage market cycles. If you withdraw money from your retirement savings at the same time that your account is losing value because of a bear market, you'll never have a chance to recover your losses. Experience and expertise can help keep your portfolio on an even keel.
Create a structured expense budget for retirement. “Retirement is the first time in most people's lives that they've had access to this much money,” Nelson notes. “There's a big temptation to spend too much too soon. Studies have shown that the best predictor of your retirement savings lasting as long as you do is having enough cash and equivalents—plus enough extra to account for spending power lost to inflation—to fund the first five years of retirement without dipping into your investments. That way your investments are less likely to be impacted by withdrawals and a market downturn at the same time.
Jack Nelson is a Registered Representative of INVEST Financial Corporation, member FINRA/SIPC, and its affiliated insurance agencies offer securities, advisory services and certain insurance products and are not affiliated with Johnson Financial Group, Johnson Investment Services or Johnson Bank. Products offered are:
Not FDIC insured | Not a deposit or other obligation of or guaranteed by any bank | Subject to risks including the possible loss of principal amount invested.