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    • How to spend your retirement savings responsibly
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    How to spend your retirement savings responsibly

    Harry Posted on

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    you carefully preserved for retirementBut how will you spend it?

    The so-called standard rule of thumb 4% ruleA retirement withdrawal strategy that suggests retirees can safely withdraw an amount equal to 4% of their savings during the year of retirement and then adjust for inflation each year for 30 years.

    But some experts say it may be better to have a formula more tailored to your health, potential life expectancy and family history. They say it’s better to both enjoy your money and ensure it lasts through retirement.

    The 4% rule is based on: traditional 60/40 (60% stocks/40% bonds) portfolio and aims to prevent people from running out of money. However, the rule later came under review. 60/40 portfolio in 2022 It had its worst year since at least 1937, as inflation soared and interest rates rose.

    Even Bill Bengen, creator of the 4 percent rule, said: the rule no longer applies. Instead, he said retirees should cut their spending and lower their withdrawal rates, The Motley Fool reported in 2022.

    The problem with all this advice, some advisers said, is that it relies on a one-size-fits-all lifespan, which can force some retirees to live too frugally and leave too much money on the table to enjoy.

    Tim Maurer, general counsel at SignatureFD in Charleston, South Carolina, said the 4% rule is really a “96% problem.” “If you always focus on hitting the 4% figure, you won’t be able to leverage 96% of the portfolio to enjoy the wealth you’ve worked so hard to achieve.”

    Better lifespan data could lead to longer healthspan

    Since then Leaving retirement savings behind is people’s biggest fearWhen designing retirement plans, the financial industry often assumes people will live to be 95. But most Americans don’t live that long. According to research by HealthView Servicesprovider of healthcare cost estimating software.

    For example, HealthView said that almost 30% of the over-65 population with diabetes has less than a 1% chance of reaching age 95. The average male patient with type 2 diabetes will only live into his late 70s, while the average woman with the condition will live into her early 80s.

    “If people had an accurate lifespan, we could actually design better financial products and allocations for that person,” said Jay Jackson, chief executive of Abacus Life, which buys life insurance policies. “If we knew what that number was, it would be an incredibly valuable tool to use in financial planning.”

    More accurate lifespan data can be better predicted and the individual’s lifespan probability can be better. lifetime And health span or number of healthy yearsconsultants said.

    How can we get better longevity data?

    A person’s medical and family history can provide financial advisors with information that can be used to develop a retiree’s spending plan, experts said.

    Jackson recalled a client who was 76 years old and whose health profile suggested he would live another 8 to 9 years. However, the retirement plan was positioned to take into account life expectancy up to age 95, or an additional 19 years.

    By recalculating his distribution to fit his health profile, monthly retirement withdrawals have nearly doubled and “there are still significant funds remaining to manage life extension and other potential costs,” Jackson said. The extra monthly money “can be spent on more activities, more social interaction with family, access to healthier, fresher foods, access to gentle exercise, and more.” All of these will create more talented, healthy, enjoyable years.”

    Bury your head in the sand: Facts: Is Generation X in denial about their impending retirement?

    Can every American truly have a customized retirement plan?

    “Yes, we can create customized plans for each person,” said Rob Burnette, investment advisor at Outlook Financial Center in Troy, Ohio.

    In fact, many financial advisors said they see this as a future that will help retirees find a better balance between lifespan and healthspan.

    Burnette says she begins each client’s planning session by reviewing family history, “Are your parents and grandparents still alive, are they looking for genetic longevity?” He said he started with simple questions like: To test the odds, we also ask about their health conditions, medical history, and genetics.

    Jackson said Abacus Life takes this further by using its extensive database of longevity, actuarial data and technology. signed HIPAA (Health Insurance Portability and Accountability Act) Released from clients, Abacus can tap into your medical records, find odds on people who match your health condition and medical history, and provide you with the most likely life expectancy and plan accordingly.

    People may be hesitant to sign for access to medical records. Alternatively, there are free online health tests you can use to get an idea of ​​how long you might live. A member of the American Academy of Actuaries form consisting of basic questions and Abacus has a more detailed description A tool to evaluate your lifespanFor example.

    The consultants emphasized that these are just starting points. Regular meetings with a counselor, preferably in person but at least on camera, are essential to keep a customized plan up to date as you age, experts said. Updates might include a surprise health issue that has arisen or steps you’ve taken to improve your health, they said.

    Jackson also said facial analytics can help determine a person’s biological age.

    “We recommend reevaluating every year,” Burnette said. “With technology, this should be easy. I want to look at them. “Sometimes what people tell you on the phone doesn’t always match what you see.”

    Medora Lee is a money, markets and personal finance reporter for USA TODAY. You can reach him at: [email protected] And Subscribe to our free Daily Money newsletter Morning every Monday through Friday for personal finance tips and business news.

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