Longevity is a Financial Risk
December 4, 2023
Running out of money during retirement is a possibility, writes Peter Watson.
Planning your finances for later years often focuses on reaching retirement: work hard for decades for your golden years.
Most attention is on earning an income and paying the bills. Managing ongoing living expenses is important. But it is only a start.
Reaching retirement is a personal milestone but the important consideration is how will you pay for living costs after your pay check stops.
That requires you to anticipate how long you will live. That might be longer than you expect.
Spending during retirement can follow a pattern.
Early retirement spending can be relatively high.
The middle stage of retirement often changes to less activity.
During the final years your spending will likely increase. The main expense is health care. Canada has generous medical coverage, however, there are many costs that you will have to pay yourself.
Added spending during retirement is based on life expectancy. People live longer and that trend is continuing.
Add inflation to the mix and life can suddenly become very expensive.
Planning for your financial needs during retirement is something I recommend. Estimate future costs and plan how those costs will be paid.
Forecasting future expenses can be difficult. Better to have an idea of what is ahead and plan accordingly.
Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through www.watsoninvestments.com
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