Funding 40 Years of Retirement

If you live to 100, can you avoid outliving your money?

Will you live to 100? Your odds of becoming a centenarian may be improving. Earlier this year, the Centers for Disease Control reported (opens in new tab) that the population of Americans aged 100 or older rose 44% between 2000 and 2014. The Pew Research Center says (opens in new tab) that the world had more than four times as many centenarians in 2015 as it did in 1990.

If you do live to 100, will your money last as long as you do? These financial steps may help you maintain your retirement savings and income.

Keep investing in equities. Standard & Poor's 500-stock index does not automatically gain 10% or more each year, but it certainly has the potential to do so. As the benchmark interest rate is still well below 1%, fixed-rate investments are not producing anything close to double-digit returns. Some fixed-rate vehicles are even failing to keep up with the current inflation rate (about 1.5%). Turning away from equity investments in retirement may seriously hinder the growth of your savings and your level of income. What’s the right mix? Some research has shown that a portfolio constructed of between 50% and 75% in equities, coupled with a reasonable withdrawal rate, gives your portfolio a solid chance of success.

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Arrange some kind of pension-like income. If you can retire with a pension, great; if not, you may want other income streams besides Social Security and distributions from investment accounts. Renting out some property may provide it; although, the cost of third-party management can cut into your revenue. Dividends can function like a passive income stream, albeit a highly variable one. An annuity, of course, is built precisely for this purpose and annuitizing (arranging for a guaranteed stream of income) a portion of your investable assets is absolutely worth considering and will make great sense in the right circumstances.

Hold off filing for Social Security. If you are in reasonably good health and think you may live into your 90s or beyond then retiring later and claiming Social Security later can be a wise decision. If you wait to claim your benefits at full retirement age (which ranges from 66 to 67, depending on your birthdate), you will have fewer years of retirement to fund than if you left work at 62 and claimed benefits immediately. By continuing to work, you are also allowing your retirement savings a few more years to potentially grow – this might be the wisest step of all.

Funding 35 or 40 years of retirement will be a major financial challenge. The earlier you plan and invest to meet that challenge, the better.

Greg O'Donnell's mission over the course of three decades has been to guide people to pursue and maintain a healthy financial life plan that accomplishes their goals.

Investment advice offered through O’Donnell Financial Services, LLC, a registered investment advisor. Securities offered through Independent Financial Group, LLC member FINRA/SIPC. Advisory assets may be custodied at TD Ameritrade. Insurance offered by Gregory C. O’Donnell, California Insurance #0B87978. Mortgage services are provided through American Pacific Mortgage Corporation licensed through the California Bureau of Real Estate #01215943 NMLS #1850. Gregory C. O’Donnell licensed by the California Bureau of Real Estate #00971579, NMLS #298004, not all applicants will qualify, rates subject to change. Know before you owe. Insurance offered by Gregory C. O’Donnell, California Insurance #0B87978. O’Donnell Financial Group, Inc. and O’Donnell Financial Services, LLC are not affiliated with Independent Financial Group, TD Ameritrade or American Pacific Mortgage Corporation.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Greg O'Donnell, Investment Adviser
Founder, O'Donnell Financial Group

Greg O'Donnell is the CEO and founder of O'Donnell Financial Group ( (opens in new tab)). His mission over the course of three decades has been to guide people to pursue and maintain a healthy financial life plan that accomplishes their goals.