Retired Military Finances 101: Money & LongevityRetirement Funding
Most retired Senior Military Officers and NCOs are lucky. We get to retire twice. When we cross the threshold of retirement, retirement we need give some thought to how long we might live. It can be an uncomfortable reality to consider, but this shouldn't dissuade you from giving it some serious thought.
For many people preparing for retirement, one of the biggest fears is running out of money. If you've lived to 65 years, you will probably live to at least 84 years if you're male and 87 years if you're female, according to Social Security tables. These are only estimates, but it's important to keep in mind that you might live much longer than you expect, and some household members could outlive others by many years.1
You might, in fact, live to 100 years and beyond: the National Institute on Aging anticipates that the number of centenarians will grow by a factor of 10 during the first half of this century, representing a host of challenges for anyone attempting to devise a retirement strategy.1
For example, healthcare costs must be incorporated. As you age, your healthcare needs will likely grow from simple doctor's visits to potentially living in an extended care facility. These costs naturally increase over time, whether through inflation, market volatility, or other factors. So, while you can look at today's prices as a guide, you will likely need much more money to cover your healthcare. Medicare will help, but it doesn't cover everything, including a lengthy stay in extended care.2
Your retirement strategy might include a spending plan that considers the likelihood that you will want to travel, pursue your interests, and spend time with family, as well as that allows for a long life and covers the associated financial expenditures. Unless you are working beyond retirement age, it can be difficult to make up for a market dip, emergency expense, or heavy spending, so your strategy should cover many circumstances.
How much will you need to withdraw per year without diminishing your account too quickly, while still controlling for inflation and other factors? Calculating this as part of your retirement strategy may be essential. While some financial professionals have downplayed the 4% rule in recent years—the amount of your investments used in the first year of retirement—and have revised it upward or downward as needed, the theory is that you may be able to live on your retirement funds for upwards of 30 years or more.3
Other factors to consider include focusing on tax-efficient withdrawals from your retirement accounts. You might also decide that working longer or taking Social Security later (allowing for larger payouts per month) could extend your retirement strategy further.
Military Finances are Different
As a retired Senior Military Officer or NCO, we're fortunate to have an inflation adjusted pension and survivor benefit for our spouse (if you select SBP). Most civilians don't have anything close to that. And that's not where the differences end. Retired Military Members and Veterans have unique tax benefits and financial issues. That is why we think you should work with a financial advisor that deals with those issues each and every day. If you'd like to see how we do that, use the button below to schedule a free initial consultation.
If you liked this article, you might find the following blog posts useful:
To SBP or Not SBP? That is the Question
Is SBP Expensive?
Retired Military Finances 101: When to Claim Social Security
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.