The first misconception is assuming retirement will last 10-15 years.
Historically, retirement has lasted about 10 – 15 years for most Americans. The key word here is “historically.” When Social Security was created in 1933, the average American could anticipate living to age 61. By 2005, life expectancy for the average American had increased to 78.1
So assuming you’ll only need 10 or 15 years worth of retirement money could be a big mistake.
In 2010, the American Academy of Actuaries said that the average 65-year-old American male can expect to live to 84½, with a 30 percent chance of living past 90. The average 65-year-old American female has an average life expectancy of 87, with a 40 percent chance of living past 90.2
The second misconception is assuming too little risk. Holding onto your retirement money is certainly important; so is your retirement income and quality of life. During the last few decades, we have had moderate inflation (and sometimes worse — think 1980). What happens is that in time, even 3 – 4 percent inflation gradually saps your purchasing power. Your dollar buys less and less. If your income doesn’t keep up with inflation – essentially, you end up living on yesterday’s money.
As you retire, you may assume that an extremely conservative approach to investing is mandatory. But given how long we may live — and how long retirement may last — growth investing may be important. n
Investment Advisor Representative with and Securities and Investment Advisory Services Offered Through Transamerica Financial Advisors Inc. (TFA) Member FINRA/SIPC and Registered Investment Advisor. Non-securities products and services are not offered through TFA. TFA and KHI Financial Solutions are not affiliated.
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Information supplied by Andy Hejlik, KHI Financial Solutions, 130 N. 25th St., 576-1800, www.khisolutions.com.