Advice & Features Articles

Helping Your Nest Egg Go the Distance


by Alicia Wanek

A recent study showed that more than four in ten millennials are stressed about running out of money in retirement.  Imagine how many seniors have the same concern!  My grandmother once said if she met her Maker with a penny to her name, she would have spent her money well.  That’s cutting it a little too close, but it’s worth asking, what can seniors do to help make their hard-earned dollars last as long as they do?

Cut back on spending – some

Seniors likely have fewer expenses.  The kids are out of the house, and you may have either paid off your home or have down-sized, so monthly expenses are reduced.  Though many retirement calculators suggest you live on about 80% of your pre-retirement income, if you can adjust that to 66%, your money will last significantly longer.  However, don’t be so frugal that you’re not enjoying your golden years.   Chuck Cowell, Dallas Market Chairman of Guaranty Bank & Trust says, “Go enjoy life.  That’s what you saved for.”

Prioritizing those expenses is a decision best made between you, your spouse, and possibly your adult children to make sure you are all on the same page.  “Considerations such as downsizing your home, traveling, or making large purchases are best made together,” says Craig Greenway, of SFMG Wealth Advisors.  A financial advisor can be a valuable member of those discussions to examine your portfolio and help you reach your goals.

Consider purchasing some type of long-term care insurance  Long-term care insurance helps pay for the cost of care you might need to do basic daily activities not generally covered by health insurance, Medicare, or Medicaid.  Since about 60 percent of individuals over age 65 will require at least some type of long-term care services during their lifetime, Chuck says, “…an investment in a quality long-term care product today will greatly assist with future challenges and the tough decisions which lie ahead.”  Of course the earlier you purchase the policy, the lower the premiums, and since over 40% of those over 70 who apply are denied coverage vs. 7% for applicants in their 50’s, it’s best not to delay.

Bobby Davidson, local, independent insurance agent, says a newer concept is a guaranteed, universal life policy with a long-term care rider.  Bobby believes this is a “fantastic hybrid” of a term-life policy and a long-term care policy.  Call your insurer to discuss which policy is the best fit for you.  Estate attorney Colin Smith adds, “Review the terms of any long-term care policy closely, and be sure you understand the terms and conditions.”  You may want to have your lawyer read through all the “legal-ese.”

Use the 4% rule

The idea is that, under the assumption that your money needs to last 30 years after retirement, you can withdraw 4% of your portfolio in the first year of retirement and then increase the dollar amount that you withdraw each subsequent year to keep up with inflation. If you do this, you will have a very high probability of not outliving your money.  Of course, you need to meet with your financial advisor regularly to revisit your situation.  Chuck points out, for example, that the low interest rates of recent years could make it hard to keep up with inflation, though they are going back up.  The 4% rule isn’t a good fit for everyone, but it does suggest that you have a plan for how to spend your nest egg.

Senior adults are enjoying life these days like no other time before.   No one wants this season of life to be filled with financial stress.  By making some smart decisions about your money, you can focus on other important things in your life.  Show those concerned millennials how great being a senior adult can be!

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