You are thinking about retirement and all it's supposed to entail: vacations, golf and spoiling the grandchildren. But without sound financial planning, you easily could outlive your money.
Americans' median life expectancy is projected to be nearly 79 by 2015, according to the U.S. Census Bureau. Avoiding what Brandes Institute Research Director Barry Gillman called "money death" - running out of money before running out of time - is an issue for a generation of Baby Boomers hitting retirement age now or in the near future.
Making plans for living well after retirement should start before you reach retirement age.
Waiting game
If you are counting on Social Security payments to make up part of your retirement income, delaying retirement is one of the easiest ways to increase that benefit. The Government Accountability Office found that retirees who claimed benefits beginning at age 62 passed up increases of at least 33 percent compared to those who retired at 66.
And waiting until age 70 to retire ensures you will get the maximum Social Security benefits to which you are entitled.
Retirement, however, doesn't have to mean the end of your working days. Instead, AARP suggests finding contract or part-time work to make extra income - and as a bonus it gives you something to do. Earning too much can reduce Social Security payments, but at full retirement age your payment will go up to make up for the benefits previously withheld.
Annual returns
Earlier generations were advised to stick money into long- term investments (i.e. bonds) to hedge against stock market volatility. But with people living longer, the meager returns offered by the bond market might not even keep up with inflation - meaning you are losing money the longer you live.
Gillman suggests putting money into higher-yield securities and investing in "longevity insurance" such as an annuity. Investing in an annuity that will start paying at, say, age 80 can be a protection against inflation and market volatility. The caveat is that longevity insurance isn't an investment, and if you get hit by a bus at age 78, you nor your heirs might receive any money.
Other options
If you have a nest egg of $100,000 or more, you could draw down your savings at an annual rate, such as 4 percent, with adjustments for inflation, U.S. News reports. At 4 percent of the initial balance, you could take out $4,000 the first year and increase that by 3 percent each year thereafter.
Or, consider long-term care insurance. It's just a fact of life that the older we get, the more medical costs rise, but by investing in long-term care insurance, the insurer promises to help cover the cost of long-term care. The best ones allow you to spend money however you want, whether for nursing home payments or a trip to Europe.
If living well is the best revenge, living long and well is even better.
