Live Long & Prosper
When First Fiduciary helps clients develop a financial plan, the most critical assumption may also be the one that’s most unknown: life expectancy. Many Americans underestimate how long they’ll live, which can lead to financial issues down the road. The average life expectancy of Americans at birth has declined in recent years, to 74 years for men and 80 years for women. But, according to a recent report from the TIAA Institute, the life expectancy of 65-year-olds has increased to 84 for men and 87 for women. So, if you underestimate your lifespan, your financial plan may not fully align with your long-term needs. The simplest way to prolong your retirement assets is to delay retirement. Even a few more years of employment can make a meaningful impact on the likelihood of a well-funded retirement. If working longer is not an option, here are three more strategies to enhance and preserve your assets, allowing you to enjoy financial confidence and flexibility for years to come.
1. Reduce Your Withdrawal Rate
To ensure your retirement savings last, lowering your withdrawal rate can be an effective strategy. Many financial experts recommend the 4% rule, but if you’re planning for a long life, you might want to aim for a withdrawal rate closer to 3% or 3.5% of the account balance. This conservative approach helps protect your savings from running out too soon. But beyond just adjusting your withdrawal rate, reducing your fixed costs can provide even more financial security.
Downsizing your home, for instance, can lower significant monthly expenses like mortgage payments, property taxes, and upkeep. Moving to a more affordable location or selling extra cars are other practical ways to reduce fixed costs, which will free up more of your retirement income for travel, healthcare, or other unexpected needs. By cutting both your withdrawal rate and recurring expenses, you are giving yourself a financial cushion that will last, even if your lifespan stretches into your 90s and beyond.
2. Delay Taking Social Security Payments
Delaying your Social Security benefits can be one of the most impactful decisions for long-term financial stability. While you can start collecting benefits at 62, your payments will be reduced. By waiting until 70, your benefits increase significantly—by as much as 124% compared to claiming as soon as possible. If you expect a longer life, delaying Social Security ensures a larger monthly income as you age.
3. Increase Exposure to High-Quality Stocks for Growth Potential
If you're expecting to live longer, your investment strategy should also consider the potential for higher growth to keep your savings ahead of inflation and healthcare costs. Shifting more of your portfolio into stocks, rather than keeping a larger portion in fixed income, can help you achieve better returns over time. While stocks are riskier in the short term, they historically offer higher returns than bonds, which is critical for those who may be retired for 30 years or more.
As you increase your exposure to equities, it’s important to maintain a balanced approach based on your risk tolerance. For example, a portfolio with a higher stock allocation in the early retirement years can be gradually shifted to more conservative investments as you age. The idea is to allow your money to grow, especially in the first decade of retirement, so you have a larger pool of assets for when you’re older and may have higher costs associated with healthcare or long-term care. Decades ago, life expectancies were shorter and conventional wisdom promoted investing in a portfolio dominated by bonds. The problem with that strategy is that bond portfolios do not tend to appreciate over the long term.
Incorporating a balanced approach between growth and safety in your asset allocation can ensure that your retirement savings not only last but also grow, helping you navigate a longer retirement with confidence.
By lowering your withdrawal rate, delaying Social Security, and adjusting your asset allocation, you’ll be better prepared for a long retirement. First Fiduciary would be happy to help you develop a personalized financial plan that reflects your unique situation and goals. We want your financial future to be secure and worry-free.
Articles We Enjoyed:
Longevity
The Economist reviews a book by a Nobel Prize winning biologist on the topic of reversing the negative impacts of aging in humans. While many search for the Holy Grail, he offers a simple formula: sleep well, exercise, and eat moderately.
Decoding Birdsong
Scientists are uncovering the secrets of bird communications, finding complex social structures and even unique “dialects” among various species. By studying everything from geese to songbirds, researchers are beginning to understand just how much birds might have to say.
Robo-Taxis
Phoenix is embracing driverless technology with Waymo’s autonomous rides, offering a unique experience without small talk or human drivers. How long before a driverless ride becomes commonplace?
Baseball Striking Out?
Baseball’s focus on strikeouts has transformed the game, with pitchers now prioritizing speed and spin to “miss bats” rather than pitching to contact. While that strategy might help win games, is it turning off viewers?
Throw Out Your Black Kitchen Utensils
New research reveals that black plastic kitchen items, including takeout containers and utensils, often contain toxic flame retardants due to contamination from recycled electronics. Experts recommend discarding black plastic items and opting for safer materials like stainless steel, glass, or ceramic.
Tennis Gambling
As sports gambling expands, tennis players face escalating online abuse from disgruntled gamblers. This new strain of hostility highlights the unintended consequences of gambling’s integration into sports and the urgent need for better protection for athletes.
Quincy Jones Obituary
Quincy Jones, a monumental force in American music, transformed genres from jazz to pop, shaping iconic works like Thriller and influencing generations. Known for his ability to connect artists and push creative boundaries, Jones’s legacy forever reshaped the music industry.
Warm November
Why has November been so weirdly warm – and why might it continue?
Notable Reads:
Cannery Row
by John Steinbeck
Set against the backdrop of Depression-era Monterey, California, Steinbeck’s “Cannery Row" is a masterful exploration of human spirit. What the book lacks in plot, it more than makes up for in the vivid characterization of a motley crew of working-class residents. Steinbeck breathes life into his eccentric characters, each one representing a unique facet of resilience and community. The novel, filled with humor and empathy, paints an unforgettable portrait of life on the fringes, revealing the quiet heroism in everyday struggles. – AG
Sweet Thursday
by John Steinbeck
The sequel to “Cannery Row,” “Sweet Thursday” jumps ahead a dozen years to post-war life in Monterey, California. Steinbeck returns to the vibrant world of his beloved working-class characters, but this time with a more structured narrative. Doc, the marine biologist based on Steinbeck’s real-life friend, finds his world upended by the arrival of the spirited Suzy. The novel weaves heartwarming and humorous elements into an engaging storyline, deepening the reader’s connection to the quirky community of Cannery Row. – AG
Project Hail Mary
by Andy Weir
Weir’s story of a man stranded alone in space on a desperate mission to save humanity shines with its rich, well-researched science fiction. The blend of astrophysics and biology fuels the narrative with thrilling discoveries and ingenious problem-solving. However, the main character comes across as too boiler plate, lacking the depth needed to anchor the tale. His personality often feels secondary to the science. The book is unquestionably interesting, but it leaves readers – at least this reader – wanting more. – AG
More Than a Trusted Investment Advisor
Recently, we guided a young professional just starting her career through setting up a Roth IRA, taking advantage of tax-free growth and the power of compounding. By starting early, she’s positioning herself to make the most of her retirement savings with flexibility and long-term growth potential.
If you have family members in a similar stage of life, we’d be happy to consult with them.
The data contained within this newsletter is for informational purposes only. The information contained herein should not be considered investment, tax or legal advice.
This newsletter contains links to external third party websites that are not affiliated with First Fiduciary Investment Counsel. FFIC does not control or direct the content of the information contained on these websites. Information contained on the third-party website is relevant on the date the newsletter was published but may be changed or revised by the third parties without the knowledge of and/or notice to FFIC.
Statistics and other information have been compiled from various sources. First Fiduciary Investment Counsel believes the facts and information to be accurate and credible but makes no guarantee to the complete accuracy of this information.
Past performance does not guarantee future results. The mention of securities or types of securities in this newsletter should not be considered as an offer to sell or a solicitation to purchase or sell any securities mentioned. Neither First Fiduciary nor the authors hold positions in any of the stocks mentioned unless otherwise stated.
First Fiduciary Investment Counsel, Inc. is a registered investment adviser with the Securities and Exchange Commission. A more detailed description of the company, its management and practices is contained in its firm brochure document, Form ADV, Part 2. A copy of this form may be received by contacting the company at: 6100 Oak Tree Blvd., Suite 185, Cleveland, OH 44131; Phone: 216.643.9100; Email: ffic@firstfiduciary.com.