The Riskiest Day of Your Life
By Larry Swedroe | CBS MoneyWatch – Mon, Jun 25, 2012 6:03 PM EDT
The primary financial goal for most people is to make sure that their assets last as least as long as they do. The day on which there is the greatest risk of failing to meet that objective is the day you retire. The reasons, as "Someday Rich" authors Timothy Noonan and Matt Smith explain, are the day you get your gold watch, you have:
- Exhausted your human capital (ability to generate income from your labors)
- Assumed "longevity risk" (the need to fund your living expenses for the rest of your life)
Of the many risks we face when developing a financial plan, longevity risk is often the one most overlooked, or at least underestimated. And yet for many individuals, it might be the one that entails the greatest risk. Consider the following:
Today, while a 65-year-old male has a life expectancy of 19 years (to age 84), a 65-year-old couple has 50 percent chance of one surviving to age 92. That means half of all 65-year-old couples will have one spouse alive after 27 years. And they have a 25 percent chance of one reaching 97. Because being alive without the financial resources to support an acceptable living standard is too painful to even contemplate, we must plan for the possibility that we'll live longer than expected. We can reduce the risk of longevity by working longer, delaying taking Social Security benefits and buying longevity insurance (in the form of a payout annuity).
To read the entire article:
http://finance.yahoo.com/news/the-riskiest-day-of-your-life.html
Do you know what real poverty is? It is never having a big thought or a generous impulse. — Jerome P. Fleishman
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