Will You Outlive Your Money? Simple Question, But Do You Have the Answer?

Don't be a deer in the headlights. Figure out the answer to the question.
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There's a great quote from Tommy Lee Jones that I love to use. "Normal people with normal problems can be hilarious." That quote can be a daily reminder -- even a life changer -- for people who take life too seriously. It is definitely a quote worth writing down and remembering.

So there I was the other evening in my family room staring at the TV, and there he was, Tommy Lee Jones. It was an Ameriprise commercial. Maybe you've seen it -- he's in the forefront of the screen with a big banner on a building unfurling behind him. The banner asks a huge question, both literally and figuratively: "Retirement. Will you outlive your money?"

I speak and write about this question all the time, but that night, he was talking to me... and frankly, when put that way, I didn't have a clue. I know what I make now. I know how much I have saved for retirement. I can make assumptions about how much my income and savings will grow. I've even run some projections on the income my investments may generate in retirement. It feels like I'm on track, but in the end, I don't know if it will really last as long as I do.

A couple days later I was at a meeting talking about income needs during retirement and how to get people to take action when it comes to planning for retirement. Someone brought up the commercial and that same huge question. "Retirement. Will you outlive your money?" It was discussed that there are three types of profiles for people when it comes to answering that question:

  1. Deer in the headlights
  2. Confident, but inactive
  3. Proactive

I've already admitted that I am somewhere between a one and a two. I will call my profile "Confident, but less active than I should be." How about you? Will you outlive your retirement? Do you know? Should you know? It feels like we all should, especially if we are at, or near, retirement. There are plenty of steps we can take to avoid outliving our money (budget more, work longer, downsize, etc.), but we need to know what to solve for first. Obviously, the sooner we know, the better we can react or adjust.

So how do you figure it out? Here are some ideas to get you started:
  1. Get out your favorite spreadsheet software and start running some scenarios.
  2. Search the web for calculators and tools (there are lots of them out there).
  3. Or take a better route -- ask a financial advisor. Many advisors have effective planning tools focused on retirement income. Beyond how long you might live (a.k.a. "longevity"), many of them take into consideration important factors like inflation, health care costs, and long term care.

Don't be a deer in the headlights. Figure out the answer to the question, "Will you outlive your money?" If the answer is yes, start making the adjustments you need in order to avoid it. Talking with a financial advisor is a good way to get that process started. In my own case, my employer's current 401(k) provider offered a very simple and effective planning tool on their website that I was able to leverage. The exercise gave me confidence that I am on track, but that I still have work to do before I can absolutely say that I will not outlive my money. The good news is that I now have a better place to start and am much closer to the "Proactive" profile noted above than I was just a few short weeks ago.

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