Retirees - You Bet Your Life!

June 23rd, 2008 at 10:52am Brian Conroy

  Brian P. Conroy, CFP® 

I often talk to clients about investing for the “long term.”    Often the response is some version of “I’m retired, I don’t have a long term.”  Or, “I can’t take the risk of stocks, I can’t wait for challenging markets to recover- I’m retired.”  My response is, “don’t bet your life on a having a short one!”  Sharp penciled actuaries at the IRS suggest you may very well live longer than you think.  See the IRA tables to get a glimpse of how long you might live: 

http://www.finance.cch.com/tools/lifeexpectables_m.asp  

See table III.  This is the IRS table used to calculate required IRA distributions after age 70 ½. It suggests that according to the IRS a 70 year old might have a life expectancy of in excess of 26 years.  Now if you think that’s crazy, let me ask you this.  Don’t you think the IRS would like you to take your IRA distribution faster, if there wasn’t a strong actuarial reason for them to suggest a smaller required distribution?  If you distribute faster, they collect taxes faster! 

Why do I bring this up?  Because many follow a saving or investing plan that will work if they live a short life.   I suggest you bet on having a long life.  The consequence of being wrong means you might leave behind more money than you intended.  The consequences of betting on a short life and being wrong (and investing in saving accordingly) are unthinkable.  Think long term or take up smoking (just kidding).  Live Long and Prosper!  Next time-How to invest for a LONG retirement.

Entry Filed under: Retirement Planning