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How Do You Deal with the Risk of Outliving Your Money?

How does a person solve the problem of out-living their money?  If you were to die early before you get to retirement age, no problem, except you are dead.  But as you may live a long, healthy life, money becomes the big issue.  National statistics are very clear: the average age of death is the middle 80’s now.  So there is a huge possibility you will need 20 to 25 years of retirement income.  So let’s discuss possible solutions that might help you in your thinking and planning.
The first and obvious solution is to save money over your entire working life.  We can all save money, if we want to.  A rule of thumb is to save 10 percent of your income for life, even after you retire, and you will always be sure to have enough money.  For this savings to happen, however, it is important to learn how to control your spending.  If you cannot save money, there will be few options available.  Assuming you are saving 10 percent of your income, where should you then place this to keep it safe and available?   I suggest life insurance companies, because they are the strongest and most secure over the last 150 years.  I have written several blogs about this subject that you might want to go back and review.
The second potential solution is to consider living with your children.  This may present a hardship, but an example is all through the Great Depression most people had to bunk together simply to have a roof over their heads.  Now, things don’t need to be that drastic this day and age, but perhaps it’s time to think outside the box and get comfortable with getting cozy with family. Recently, one of my clients built a new home with two separate livingshutterstock_250088392 compartments, one upstairs and one down.  It has worked superbly as their daughter’s family lives upstairs and retired mom and dad live down.  They share the cost of utilities and they love the arrangement.  This couple get to watch the grandchildren grow and develop, and they aren’t far away when it comes time to read a book together or play the piano.  Another of my clients built a twin home and he lived on one side and then rented out the other side. He can watch after the property, being right next door and can bring in rental income, which will keep him going nicely well into his retirement years. Both of these options help save money.
Another solution is to move to places like Costa Rica where the cost of living is very low. Okay, take me seriously for a minute… I share this retirement location with you because I had this discussion with a lady from Montreal, Canada.  My wife and I were on vacation in Costa Rica eating lunch and at the next table was a lady who asked us where we were from and then we asked her where she was visiting from. She told us she splits her time between Canada and Costa Rica.  During the winter she goes back to Costa Rica, then Canada during the summer.  She said the cost of living in Costa Rica saves her a ton of money, enough to make the travel costs insignificant and enough to make it possible to live comfortably in her retirement years.
Another option is to continue working in your older years. This isn’t always an option people want to think about doing, but some people, like my friend’s 80-year-old dad who is a music teacher at a local college, enjoy working more than they enjoy sitting at home.  Plus, if you have not planned well in your younger years, being a greeter at a big-box retailer might be your only option. This is not intended to be funny, I am just suggesting sometimes we need to do something to solve income problems and when you go to Walmart don’t you often see many elderly people happy as can be saying hello to you when you enter the store?
Along with these solutions, another option is to get a job you can do using a computer at home.  Some of my clients take airline reservations from their home office.  One client does medical billing from her home, another does accounting.  Home-based self-employment can work for some people.
What if you don’t want to move in with your children, or live in Costa Rica, or work at Walmart, or work from home?  Then I suggest you learn to control your spending sufficient to create surplus so at retirement you have enough passive income to live comfortably, and do it NOW!  The best way to do this is to create a Spending Plan. Go to www.moneymastery.com to learn how.

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