January 25, 2011
OPEN Forum Message
Company Culture
Can you recognize signs that your company's culture isn't working? Get advice from the experts on what to look for–and how to fix it.
Learn more
Every time I give a speech, I ask the question: How many of you are afraid you'll outlive your money? Hands shoot up in the air. It's the biggest financial worry, surveys have shown, even among the affluent. And for good reason: We're all living longer these days. Our investments are still recovering from the recession. And inflation, taxes and healthcare costs are unknowns.
But there are four things you can do now to make sure you outlive your money -- and put your mind at ease. Here's what you need to do:
1. Figure out your life expectancy.
Most people don't like to think about how long they're going to live. Why? Because it involves thinking about when you're going to die. Get over it. It's important to have a general idea.
You can use a calculator on the internet (I like the one from Wharton, which you can find here). They offer short and long form versions, but even the lengthier only takes about five minutes. It will ask you questions about your health, your eating habits, your family history and whether you speed. Be honest.
If that kind of calculation isn't your thing, you can make an educated guess, but play it safe. If you have a strong family history of longevity, shoot for 95 to 100. If your family is prone to disease, go a little lower. When in doubt, overshoot a little.
2. Make a withdrawal strategy.
Retirement experts use a rule of thumb here: 4 percent. That's about how much you can pull out of your nest egg every year if you want your money to last as long as you do. But that number isn't even close to set in stone; it's very much a moving target, because it assumes that your money is earning a steady return. If the market is doing well, your 4 percent will be more. If it's down, and your accounts are down with it, your take for that year is going to be smaller.
Want more retirement tips from Jean Chatzky? Check these stories out:
3. Know what you can expect from Social Security.
Recently, a financial advisor I interviewed for one of my columns likened retirement income to a bicycle: The back wheel is your nest egg, and the front wheel is guaranteed income from sources like Social Security. That's a crucial element, because if you're getting enough from Social Security to cover some of your fixed expenses, you can pull less from your retirement accounts, thus making that money last longer. You can estimate your Social Security payout at ssa.gov.
4. Check in with yourself.
Every year or so, take a look at how things are pacing. Run the numbers again. Are you spending too fast? Too slow? (Cinching your wallet too tight is a problem as well -- you work hard, particularly as a small business owner, and you deserve to enjoy the fruits of that labor). T. Rowe price has a helpful tool for this.
Jean Chatzky, award-winning journalist and best-selling author, is the financial editor for NBC's "Today," a contributing editor for More magazine, and a columnist for The New York Daily News. She is the author of six books, including her newest, Money 911: Your Most Pressing Money Questions Answered, Your Money Emergencies Solved. Check out Jean's blog at JeanChatzky.com. You can also follow her on Twitter and Facebook.
American Express OPEN and Courtyard Hotels have teamed up to provide a 5% discount at participating properties across the U.S. To learn more, go to http://www.marriott.com/opensavings.
OPEN Savings®: Payment must be made with an American Express® Business Card at the time of purchase; savings will be credited to your account. Maximum annual savings for each Marriott brand is $1,500 per Card account. Other restrictions and limitations may apply. Subject to offer terms and conditions located at opensavings.com. Merchant participation and offers are subject to change without notice.
Check your balance, review recent transactions and pay your bill on the go.
PAMELA YELLEN 1 year 3 months and 26 days ago
Here are three related tips to avoid outliving your money from my best-selling book, Bank On Yourself (www.bankonyourself.com/products):1. Trying to figure out your life expectancy is an exercise in futility. (Can anyone reading this tell me what day you’re going to die on?)I recommend you assume you’ll live to be at least 100 years old, in order to make sure your money dosen’t run out before you do.2. A good retirement income withdrawal strategy is to have a financial foundation that does not depend on what the markets are doing and can provide you a guaranteed income that can last as long as you do.3. When planning for your retirement, its best to assume you won’t be able to rely on Social Security for the rest of your life.Pamela Yellen, PresidentBank On Yourself