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Out of money at 90, now what?


When we conducted our client poll back in September, we asked our clients for the one thing that worries them most about their money and personal finances.  44% of our clients responded by saying that outliving their assets was their top concern.

It seems that no matter how much money one has, nobody wants to be reliant on others or institutions later in life.  One of the major issues that impacts how long money will last is inflation.  And, inflation is something that people just don’t think about when they are laying out their financial and retirement plans.  Even a modest two or three percent inflation rate can take a serious bite out of the purchasing power of a pension, social security and investment portfolio.  Unfortunately, you have no control over it either.  The only thing you can do is make sure you have enough of your investment dollars in asset classes that will help you keep up.  And don’t get too conservative too early with your investment allocations.  For inflation risk can be way more risky than market risk!

But, the one thing that you do have control over is your level of spending.  Some clients have enough resources that they really can spend whatever they like and not put themselves in a perilous state later in life.  In fact, sometimes we have to encourage people to spend more for their own pleasure rather than for the enjoyment of their heirs!  But, for those who need to pay attention to spending, the first step is to understand where the money goes now.  Figure out what expenses are for necessary items.  These are usually the items that inflate over time like utilities, real estate taxes, and food.  Next determine what you are spending for the extras such as vacations, eating out, and other forms of entertainment.  Most of these expenses continue until your early to mid-eighties and then begin to tail off as you are not quite as mobile.  The other significant expense is your primary residence.  Understand what it really costs you to live there!  And, be sure to factor in the inevitable biggies like the new roof, heating and cooling systems, and ongoing maintenance that will rear their ugly head from time to time.  Once you have a handle on the fixed, discretionary, and house related expenses, a financial advisor can help you run various scenarios to make sure you take action today if necessary so that you don’t run out of money when you are 85, 90, or 95 years old!  Action is the key word here.  Don’t just let it to chance.

Chip Addis
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