Longevity
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Can I Retire?
Published February 19, 2020
Figure out if you've saved enough to support your retirement with Blueprint Income's 'Can I Retire' tool.
- You can retire when you’ve saved enough to support your spending for the rest of your life.
- Be sure to use conservative investment and lifespan assumptions when doing this calculation.
- The more your spending is met through guaranteed, lifelong income sources, the less risk you’ll face.
Knowing you were ready to retire was much easier decades ago when people had pensions. You were ready to retire when you reached an age where you could access a pension, and that pension was large enough to support you. The pension promised you a steady level of income for as long as you (and perhaps your spouse) were alive regardless of what happened in the financial markets and how long you lived.
Can I Retire?
Unfortunately the question of ‘can I retire?’ is not as simple to answer in the post-pension era where we are managing our own retirement savings. Now, we’ve taken on risk and uncertainty in the form of:
- Market Risk: How much will I earn on my savings in retirement? How does that affect the amount I can safely withdraw each year?
- Longevity Risk: How long will I live in retirement? How does planning for different lifespans affect the amount I can safely withdraw each year?
- Inflation Risk: How much will prices increase in the future, and how does that affect the amount I can safely withdraw each year?
To know you’re ready to retire, you need to do a financial projection that takes into consideration your age, gender, potential lifespan, assets, desired spending, Social Security, other sources of income, and a range of potential investment and inflation assumptions. If the money you’ve saved allows you to meet your desired spending for life under conservative assumptions, you are ready to retire. Note, though, that you should rerun these projections annually to confirm you’re still in good shape. As time evolves, the projections might recommend decreasing, or perhaps even increasing, your spending. Below we provide a link to a projection model that you can use.
Do I Have Enough Guaranteed Income?
Fortunately, even if you don’t have a pension, you can buy yourself something similar known as an income annuity. An income annuity provides steady income for as long as you (and perhaps your spouse) are alive. The income is guaranteed by the insurance company issuing the contract. The benefit of having at least your non-discretionary spending covered by guaranteed income is that you won’t have to worry in retirement about not being able to cover those expenses because of poor financial markets or because you live a long time.
Get Answers
At Blueprint Income, we’ve built an Excel tool do help you perform these calculations. Click the button below to download the tool.
Don’t hesitate to reach out with any questions.
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