{"id":10492,"date":"2025-02-21T00:29:17","date_gmt":"2025-02-21T00:29:17","guid":{"rendered":"https:\/\/finderica.com\/?p=10492"},"modified":"2025-02-21T00:29:17","modified_gmt":"2025-02-21T00:29:17","slug":"worried-about-running-out-of-money-consider-the-1-2-punch-approach-to-retirement-income","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=10492","title":{"rendered":"Worried About Running Out of Money? Consider the 1-2 Punch Approach to Retirement Income"},"content":{"rendered":"<div>\n<p>Believe me, you are not alone if you have nervously asked yourself, your spouse or even a financial advisor: \u201cwill my retirement savings last as long as I do?\u201d\u00a0 Concerns about running out of money in retirement are almost universal \u2013 no matter how much money you have.\u00a0 After all, there are many unknowable variables that can impact your retirement security \u2013 not least of which is not knowing how long you are going to live.<\/p>\n<p>You might have enough to live comfortably or even luxuriously until age 85, but what happens if you luckily live to be 100? The good news: There are numerous strategies you can use to significantly reduce your risk of running out of money in old age.<\/p>\n<h2 class=\"wp-block-heading\" id=\"h-what-does-running-out-of-money-really-mean\">What Does Running Out of Money Really Mean?<\/h2>\n<p>Running out of money in retirement does not mean that you are completely penniless. It really is more a question of \u201cwill my savings last?\u201d Running out means you have used up all of your retirement savings and home equity and are left with whatever guaranteed income streams you might have (Social Security, an annuity or a pension if you are lucky).<\/p>\n<p>Most people who run out of money in retirement continue to scrimp by \u2014\u00a0 living on Social Security income and they have probably opted into Medicaid instead of Medicare.<\/p>\n<h2 class=\"wp-block-heading\" id=\"h-what-are-the-chances-of-actually-running-out-of-money-in-retirement\">What are the Chances of Actually Running Out of Money in Retirement?<\/h2>\n<p>According to recent research from Morningstar, approximately 45% of Americans are projected to run out of money in retirement.<\/p>\n<p>And, you are not necessarily safe if you are a high earner.\u00a0 According to a detailed report by the <a id=\"dyn_1414943971\" class=\"external\" href=\"http:\/\/poseidon01.ssrn.com\/delivery.php?ID=316105111106007110005120106103025094097057069013079039085087065107105003122069084075054034098101102014042108118090065106108097037027053089084024125076083078116098037033035090068082021024008075025076028020110023119076070019023112027023094064123082007&amp;EXT=pdf\" target=\"_blank\" rel=\"noopener noreferrer\">Employee Benefit Research Institute (EBRI)<\/a>, households with low income face a huge risk, but many wealthier households are also likely to run out of money.<\/p>\n<ul class=\"wp-block-list\">\n<li>83 percent of baby boomers in the lowest income quartile will run out of money in retirement<\/li>\n<li>47 percent of boomers in the second lowest quartile will run out<\/li>\n<li>28 percent of boomers in the second highest quartile will run out<\/li>\n<li>13 percent of boomers in the highest income quartile will run out<\/li>\n<\/ul>\n<p>Yikes! The above data refers to people who will be retired for 35 years.\u00a0 However, the information is only slightly better if you are living in retirement for 20 years \u2014\u00a0 even then a full 81 percent of the lowest income quartile and 8 percent in the highest income quartile will run out of money.<\/p>\n<h2 class=\"wp-block-heading\" id=\"h-use-a-1-2-punch-to-make-sure-your-retirement-savings-will-last\">Use a 1-2 Punch to Make Sure Your Retirement Savings Will Last!<\/h2>\n<p>There are multiple ways to make sure your retirement savings last as long as you do.\u00a0 One way is to use a phased approach to utilizing your savings.<\/p>\n<p>Peter Tsui is the director of global research and design for S&amp;P Dow Jones Indices.\u00a0 He suggests a <a href=\"https:\/\/www.researchgate.net\/publication\/318238795_Rethinking_Longevity_Risk\" target=\"_blank\" rel=\"noopener noreferrer\">method<\/a> for handling longevity risk \u2013 you divide retirement into two phases and fund each phase separately:<\/p>\n<p><strong>Phase 1:<\/strong> The first phase lasts roughly from retirement age until age 85, which according to the Society of Actuaries, is close to the average life expectancy for someone who turns 65 years old. The actual average life expectancy is 87 \u2013 this means that you have at least a 50% chance of living longer than 87 (perhaps MUCH longer) and a 50% chance of living not as long.<\/p>\n<p><strong>Phase 2:<\/strong> The second phase is from age 85 through the rest of your life \u2013 however long that might be.<\/p>\n<p>To fund the <strong>second phase<\/strong> of retirement, Tsui recommends that at retirement you purchase a deferred lifetime annuity with income that will begin at age 85 and last until your death.<\/p>\n<ul class=\"wp-block-list\">\n<li>A deferred lifetime annuity is simply an annuity that you buy now for income that will start at a predetermined future date.\u00a0 Lifetime annuities pay income for your lifetime \u2013 no matter how long that will be.<\/li>\n<li>The amount of income you will want to purchase will depend on the difference between any other guaranteed lifetime income sources like Social Security and the cost of your desired lifestyle at that time. However, be sure to also factor in healthcare costs which tend to increase as you get older.<\/li>\n<\/ul>\n<p>Your remaining savings can be used for the <strong>first phase<\/strong> of retirement. Since the time period for using these assets is known, it is much easier to determine how much you can withdraw each year.<\/p>\n<h2 class=\"wp-block-heading\" id=\"h-will-the-1-2-punch-work-for-you\">Will the 1-2 Punch Work for You?<\/h2>\n<p>If you want to model this strategy in your own retirement plan, you can do so in the Boldin Retirement Planner.<\/p>\n<ol class=\"wp-block-list\">\n<li>First research how much income your savings can buy.\u00a0 The annuity calculator let\u2019s you estimate a deferred lifetime annuity.\u00a0 You will probably want to look carefully at the estimates to assess an annuity with inflation protection as well as spousal benefits if you are married.<\/li>\n<li>With this annuity information, you can run a scenario in the retirement planner against your current retirement plans and see if the 1-2 punch phased retirement strategy could strengthen your own answer to the all important question of \u201cwill my retirement savings last.\u201d<\/li>\n<\/ol>\n<h2 class=\"wp-block-heading\" id=\"h-other-ways-of-making-sure-your-retirement-savings-will-last\">Other Ways of Making Sure Your Retirement Savings Will Last<\/h2>\n<p>There are numerous other ways to mitigate the risks of running out of money in retirement.<\/p>\n<p><strong>Big Savings:<\/strong> If you have a lot of money, you can often live off the dividends and interest earned on those assets but you need to make sure that you have the right allocations so that your money will both growth and be usable by you in the near term.<\/p>\n<p>It is absolutely possible to have more savings at the end of your retirement than when you started.\u00a0 Here are 8 tips for this kind of financial success.<\/p>\n<p><strong>Bucket Approach:<\/strong> Tsui\u2019s two phase approach is essentially a bucket strategy \u2013 allocating different buckets of money in different investments or for different purposes. There are many other ways of bucketing your money for retirement.\u00a0 Explore other bucket strategies and their pros and cons.<\/p>\n<p><strong>Using Home Equity as a Fall Back:<\/strong> Some homeowners plan to make their retirement savings last as long as possible and then downsize or get a reverse mortgage to make ends meet thereafter. This can be a viable approach, but you may want to explore cashing in on the home in advance of when you actually need it.<\/p>\n<p><strong>Try to Pinpoint Your Longevity:<\/strong> Some people try to get a particularly good estimate of their longevity and plan their retirement finances around that particular number.\u00a0 There are quite a few life expectancy quizzes that can help you, but they have not yet been proven to be scientifically accurate.<\/p>\n<p>Try any of these scenarios in the Retirement planner and see what gives you peace of mind.<\/p>\n<h2 class=\"wp-block-heading\" id=\"h-visualize-your-future-know-what-you-need-and-have-a-plan\">Visualize Your Future, Know What You Need and Have a Plan<\/h2>\n<p>We at Boldin think that you will do a better job transitioning to retirement if you have a solid understanding of what you have and what you will need and if you have explored various options for making it all work.<\/p>\n<p>The Boldin Retirement Planner is a highly detailed planning tool that let\u2019s you model the best time to start Social Security, how you might be able to use home equity, how you might pay for long term care and much more \u2014 including trying what if scenarios with various investment accounts.<\/p>\n<p>Best of all, this tool lets you set different spending levels for any time period you can imagine. Rethinking your retirement budget can dramatically lower how much you need overall and make you feel better about your retirement prospects.\u00a0 <\/p>\n<p>Let the Boldin Planner help you get a clear picture of your future\u2026 so that you can get there.<\/p>\n<\/p><\/div>\n<p><a href=\"https:\/\/www.boldin.com\/retirement\/knock-out-the-will-my-retirement-savings-last-worries\/\" target=\"_blank\" rel=\"noopener\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Believe me, you are not alone if you have nervously asked yourself, your spouse or even a financial advisor: \u201cwill my retirement savings last as long as I do?\u201d\u00a0 Concerns about running out of money in retirement are almost universal \u2013 no matter how much money you have.\u00a0 After all, there are many unknowable variables<\/p>\n","protected":false},"author":2,"featured_media":10493,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rank_math_lock_modified_date":false,"footnotes":""},"categories":[348],"tags":[2511,331,104,4246,350,601,4245],"class_list":{"0":"post-10492","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-retirement","8":"tag-approach","9":"tag-income","10":"tag-money","11":"tag-punch","12":"tag-retirement","13":"tag-running","14":"tag-worried"},"_links":{"self":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/10492","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10492"}],"version-history":[{"count":0,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/posts\/10492\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=\/wp\/v2\/media\/10493"}],"wp:attachment":[{"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10492"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10492"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finderica.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10492"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}