Americans are increasingly living past age 100. A new report from the Centers for Disease Control and Prevention found that the number of Americans age 100 and older has increased by nearly 44 percent from 50,281 in 2000 to 72,197 in 2014.
One of the most difficult aspects of living a long life is paying for it. If you retire at age 65 and live until 100, that’s 35 years of retirement you need to finance. Here’s how to make sure you don’t run out of money if you live to be 100.
Delay claiming Social Security. You are eligible to receive the entire Social Security payment you have earned at your full retirement age, which is 66 for most baby boomers and 67 for everyone born in 1960 or later. If you delay claiming Social Security beyond your full retirement age you can increase your monthly payments by 8 percent for each year of delay. A baby boomer who signs up for Social Security payments at age 70 could increase his benefit by 32 percent. These higher payments will last for the rest of your life.
Keep up with inflation. The prices of many goods and services are likely to rise over a 35-year retirement, so it’s a good idea to take steps to protect yourself from inflation. Your Social Security payments will automatically increase each year as the cost of living rises. Some types of government bonds, such as Treasury Inflation-Protected Securities, are guaranteed to keep up with inflation. Some retirees also like to keep part of their savings invested in assets that have historically kept pace with inflation, such as stocks, commodities or real estate, but these investments are not guaranteed to match or beat inflation.
Get a job with a pension. Many current retirees receive a steady stream of pension payments from a former employer. Traditional pension payments continue for the rest of your life, no matter how long that is, which is especially beneficial for people who live a long life. However, only a minority of pension payments are adjusted for inflation, so the purchasing power of your pension could decline over time. There’s been a significant decline in the number of employers providing traditional pension plans since the 1980s, but some jobs continue to offer this valuable retirement benefit.
Buy an immediate annuity. An immediate annuity is an insurance product that provides monthly or annual payments, sometimes for the lifetime of the purchaser. You typically must hand over a lump sum of cash to an insurance company in exchange for a steady stream of payments that will last as long as you live. However, annuities charge sometimes steep fees and carry the risk of the insurance company defaulting on its payments. The money you invest in an annuity typically isn’t available for an emergency or to leave to heirs. A similar type of financial product, a charitable gift annuity, allows you to avoid outliving your retirement savings while supporting the mission of a nonprofit organization.
Use a conservative draw down strategy. If you want your retirement savings to last for several decades you will need to draw it down very slowly. Some retirees choose to spend only the investment returns their nest egg generates. Other financial advisers think you can safely spend as much as 3 to 4 percent of your savings each year. If you have a $1 million nest egg, that means withdrawing $40,000 or less each year.
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How to Finance Living Until 100 originally appeared on usnews.com
