By their late 60s and 70s, most Americans have either left the workforce altogether or scaled back to part-time work. But this doesn’t mean that retirement planning ceases to be important in your 70s.
Budgeting and Portfolio Distribution
From a financial standpoint, the most important aspects of retirement planning in the 70s may be budgeting and portfolio distribution. We talked briefly about budgeting in our last article. Since your income during retirement will likely be relatively stable as you withdraw money from your retirement account and possibly receive Social Security benefits each month, it will be important to plan and budget your retirement expenses carefully.
When it comes to portfolio distribution, try to determine how much money you can withdraw from your account each month to meet your budgeted retirement living expenses without jeopardizing your portfolio’s long-term future. Two common portfolio distribution strategies are withdrawing a set dollar amount of money each month, or withdrawing a percentage of the account balance each month.
With the set dollar amount 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.
Ideally, you may want to try to plan your retirement budget so that you can live off of 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.
Working in Retirement
If you discover in your 70s that your savings may be insufficient to meet your budgeted retirement expenses, you could continue working part-time instead of entering a full-time retirement. According to the Bureau of Labor Statistics (BLS), the labor force participation rate for older workers has been rising since the late 1990s, with a larger share of people 65 and over staying in or returning to the labor force. Forty-four percent of Americans over age 65 who are still in the workforce are working part-time, reports the BLS.
In fact, the traditional idea of a full-time retirement at any age is being re-thought by many older Americans, who are viewing their retirement years as a time to “rewire” instead. This is especially true as the average life expectancy continues to rise. According to the Centers for Disease Control, the average life expectancy for men and women in the U.S. is now 78.7 years.
In addition to 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.