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1 in 5 Older Americans Believe this Retirement Myth

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Friday, May 6, 2022

According to a Fidelity Investments survey, many older Americans subscribe to the belief that financial advisors would suggest using 10 to 15 percent of their retirement funds each year. “This number is way wide of the mark,” explains Michael Norton, Senior Vice President, Investments for David Lerner Associates. “The correct figure is closer to four percent and some experts say even that is too much in the current financial climate.”

The Fidelity study compared retirement periods of 28 years from 1926 and the end of 2020. What they found was that, with one exception, withdrawing ten percent a year would have resulted in the fund not lasting through retirement.

The year that was the exception was 1982 when the stock market saw an exceptional bull market and it would have been possible to withdraw 10 percent and the funds for retirement would have lasted 28 years. 2022 is unfortunately at the other end of the scale. We are experiencing rapid inflation, which erodes the value of retirement funds.  The Consumer Price Index climbed by seven percent in the year through December, its fastest pace since 1982.

What does this mean for older Americans either close to or already in retirement?

One positive factor for retirees is that their spending habits have changed. They have more flexibility than those still working. If you must commute to work the gas prices take a chunk out of your paycheck.  A retiree can choose not to drive as much. However, many of the costs affect older Americans just as much – rent, food, and clothing for a start. Here are some suggestions for dealing with this period of rapid inflation:

Adjust your budget

Reevaluate how you spend your monthly income. See if there are items that can be cut or substituted.  Perhaps you can eat out less, cut back on travel, and find ways to cut the grocery bill.

Find a way to earn more income

The pandemic has led to what’s being called the Great Resignation. Employers are scrambling to find workers. Think about going back to work part-time.

There are also many lucrative “side-hustles” that can earn you money online.  You probably have skills that others can use. One smart young man is making a living selling coloring books on sites like Amazon and Etsy. He hires designers on Fiverr or guru.com to make the books and then sells them for a profit. If you are a decent writer there are many sites where you can offer your services for hire. Another woman buys interest items at thrift stores and resells them online. Where there is a will, there is always a way.

If you are close to retirement, use this retirement calculator to figure out how much you’ll need and work on a plan for how much you can use each year. That way you will have a secure retirement fund that lasts without struggle and stress.




Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC.

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Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Lawrenceville, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 800-367-3000 Visit our website: www.davidlerner.com

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