December 2017Volume 23Number 2PDF icon PDF version (for best printing)

Five action steps now to make your money last

Making your money last through your lifetime may be this generation’s greatest financial challenge. Why? Interest rates are at historic lows and lifespans are at record highs. For those of you planning to retire in the next decade, that’s an ominous combination.

Your parents weren’t too concerned about making their money last. They retired at age 65, bought bonds yielding 8% and died at 70 or so. Easy peasy, no big deal.

Things have changed. Bonds no longer yield 8%; investment grade bonds are in the 2.5% range. The average 50-year-old woman can expect to live to age 83, much longer than the previous generation. But your expected lifespan may even be longer. New research published by the National Academies of Sciences, Engineering and Medicine suggests that upper-income women can be expected to live until age 92. Keep in mind, that’s just the average—you might get lucky and live to 100 or more.

The longer you live, the more complicated your financial situation can be. Making your money last is much more difficult than accumulating your assets, especially since you don’t know how long your money needs to last—you’re trying to set goals against a moving target.

Don’t wait until retirement to prepare for this challenge. Here are five steps you can take now to make your future much more manageable:

1. Make sure you’re on the right track. Make sure your career and other key aspects of your life are on the right track. Nothing is ever perfect, but it’s smart to check in with yourself and see if you’re on a reasonable track with your career. Is this really what you want to do over the long term? If not, take action. Plan changes in your future, cost them out and create a realistic strategy for making those changes. With those changes in process, it’s a good time to begin your financial plan.

2. Create a financial plan. Be realistic, don’t fool yourself with lofty assumptions. If you’re in the midst of making changes to your life, incorporate those costs into your financial plan. This is a reality check to estimate you how much you will need to make your money last. Essentially, a financial plan will help you determine where you are and where you need to be. The challenge is to design and execute an investment plan to fill that gap.

3. Invest based on your target return. To make your financial plan work, you will need to earn a certain long-term return on your investments. As long as it fits with your risk tolerance and is realistic given market conditions, that should be your target for long-term investment returns. Your asset allocation, the composition of your portfolio, should be carefully chosen based on historical data to give you confidence that you can achieve your long-term investment return.

4. Leverage retirement plans to save even more. Depending on your work situation, you may be able to take advantage of certain retirement plans to reduce your taxes and save for the long term. There are money-saving opportunities available beyond the IRA or 401(k), so check with an actuary or a retirement benefits expert to see if such plans could be a possibility for you. The savings can be substantial and could help you make your money last longer.

5. Choose the right financial advisor. This is more challenging than you might think. Make sure the advisor you choose is a fiduciary, which means they operate in their clients’ best interests – not everyone does! Learn about their investment philosophy. Choose an advisor who wants to learn about you and help you through today’s treacherous investment markets. Don’t get sucked into high-cost products – they usually make your advisor rich, not you. Keep investment costs low. Many investors are surprised to learn that the investment business is one in which you don’t get what you pay for – higher costs usually mean lower returns.

Making your money last through your lifetime is challenging enough. Don’t make it harder by avoiding the subject. Taking steps now can make your retirement years much easier and enjoyable. For more articles on the subject, check out our Women’s Group Blog at

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