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David Lerner Associates: Financial Resolutions In Your 70s

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Monday, December 30, 2013

In this series of articles, we have been suggesting New Year’s financial resolutions that may be appropriate for each stage of life. This article offers three suggestions for New Year’s financial resolutions for individuals in their 70s.

Financial Resolution #1: Settle on your retirement budget and portfolio distribution strategy. Your monthly income during retirement may be relatively stable as you withdraw money from your retirement account and possibly receive Social Security benefits. This makes carefully planning and budgeting your retirement expenses especially critical.

“At the same time, you must plan a portfolio distribution strategy that meets your budgeted retirement living expenses without jeopardizing your portfolio’s long-term future,” says David Lerner Associates Executive Vice President/Branch Manager Jonathan Jarow. Two common approaches are to withdraw a set dollar amount of money or a percentage of the account balance each month. With the former strategy, the amount of income is more predictable, which may make personal budgeting easier. However, the percentage strategy provides more control over the funds withdrawal rate and the portfolio’s overall drawdown.

Some experts recommend planning your retirement budget so you can live off the income (or interest) generated by your investments and leave the principal intact. “This will help ensure that you don’t outlive your retirement nest egg and may also enable you to leave an inheritance for your heirs,” says Jarow.

Financial Resolution #2: Eliminate debt — and don’t assume any more. Every dollar of debt you can eliminate at this life stage will make it a little bit easier to live within your retirement budget. If you are still carrying credit card debt, make paying off these cards an immediate priority. And once they’re paid off, vow not to use them again (use cash or debit cards instead) unless you are disciplined enough to pay off the balance in full each and every month.

If you are still making payments on a home mortgage, think about whether it makes sense to try to finish paying it off early. “On the one hand, this could give you more financial freedom and flexibility in your monthly budget,” says Jarow. “But if doing so would cause an undue financial strain and your mortgage payment amount is comfortable within your budget, it might be smarter to just keep making payments according to your existing amortization schedule.”

Financial Resolution #3: Devise a financial Plan B in case your retirement nest egg is insufficient. If you discover in your 70s that your retirement savings may be insufficient to meet your budgeted retirement expenses, you may have a couple of options. One is to reduce your spending and thus the amount of money you must withdraw from your retirement account each month. “This could enable your nest egg to last years longer than it’s projected to at your current rate of spending and drawdown,” says Jarow.

Another option might be to continue working part-time instead of entering a full-time retirement, or go back to work part-time if you have already retired. This presumes your health will allow you to work and that you can find good employment opportunities. According to the Bureau of Labor Statistics (BLS), the labor force participation rate for older workers has been rising since the late 1990s. And the number of employed people age 75 and over increased by 172 percent between 1977 and 2007.

Aside from financial reasons, many older Americans today are continuing to work simply because they believe it helps keep their bodies healthy and their minds sharp. Some are living their entrepreneurial dreams by starting businesses that they didn’t have the time and/or resources to launch earlier in their lives. And others are going back to school to learn more about subjects that have always fascinated them — or to obtain the training and education needed to start a brand new career in their golden years.

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. 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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