Could Assumptions Harm Your Retirement Plan?

 Two Common Misconceptions To Think About

11052015cahyrp0001#1) 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 58 as a man or 62 as a woman. By 2014, reports indicated life expectancy for the average American had increased to 78.8.1,2

So assuming you’ll only need 10 or 15 years worth of retirement money could be a big mistake.

In 2014, the Centers for Disease Control and Prevention’s National Center for Health Statistics said that the average 65-year-old American male can expect to live to nearly 83. The average 65-year-old American female has an average life expectancy of 85.5.2

#2) Assuming too little risk.

Holding onto your retirement money is certainly important; so is your retirement income and quality of life. Over the last few decades, we have had moderate inflation (and sometimes worse, think 1980). What happens is that over time, even 3-4% 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.




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