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Old money: How much will you need to live past 100?

Average life-expectancies are creeping upward. To prevent having more life than money, you need to think differently about your retirement years, experts say.

By Smart Spending Editor Aug 29, 2013 5:28PM

This post comes from Geoff Williams of partner site U.S. News & World Report.

MSN Money PartnerCarmelo Flores Laura, a retired cattle and sheep herder in Bolivia, made news in mid-August when evidence surfaced that he may be the oldest person in the world, and the oldest person to have ever lived. He is believed to be 123.

Senior woman blows out candles on birthday cake © Jaime Kowal, Photodisc, Getty ImagesOr not. Some reports have quoted gerontology experts casting serious doubt on the veracity of the documents showing Laura's age. (The experts state he is merely 107.) Nobody doubts, however, that the toothless Bolivian is old. He also isn't exactly living in the lap of luxury. As he presumably has his entire life, according to the Associated Press, Laura lives in a hut with a straw roof and a dirt floor.

Regardless, plenty of Americans worry about growing old and being forced to live in similar conditions. In 2010, a memorable poll by Allianz Life Insurance Company of North America stated that 61% of Americans were more fearful of their money running out than of dying.

For those of us who would like to live to 123 or some other ridiculously high number, and still have ample income, some personal finance experts suggest the following:

Start saving and investing young

Obvious advice, but it has to be said. The younger you start putting money away for your retirement, the more time you have to pile it up.

Figure out what your yearly income should be when you retire

"There are many factors that impact this calculation, such as lifestyle, culture and cost of living," says Brian Porter, a professor of management at Hope College in Holland, Mich., who specializes in accounting and finance. "A general consensus is that, once retired, an American investor should withdraw no more than 4% or 5% from retirement savings each year. For example, if an investor anticipates needing $100,000 per year -- not a large amount, considering inflation -- during retirement, the investor needs to save over $2 million."

Speaking of which: Remember inflation.

That is, when you're investing for your retirement, you really need to factor that in.

"Your investment portfolio shouldn't just include stocks and bonds, but real assets, including real estate, commodities and certain hedged strategies," says Allan Flader, a financial adviser with RBC Wealth Management, a financial advisory firm for the affluent and high-net-worth, headquartered in Phoenix. Having some assets that are inflation-adjusted is a must, Flader says. "Otherwise, inflation can kill you."

No kidding. Porter has done the math."An individual who is 22 years of age, planning to retire at 67 -- 45 years in the future -- will face an average price increase by 378%, assuming an annual inflation rate of 3%," Porter says. "If the person lives until 90 –- 68 years in the future –- prices will be 746% greater."

And if this hypothetical 22-year-old makes it to 123? Porter says average prices will be 1,980% greater.

More specifically and practically, Porter explains that if our 22-year-old lives on $40,000 a year in 2013 and wants an equivalent lifestyle in 45 years, he or she will be spending $151,264 a year by 2058 –- and $298,538 in annual income 68 years from now (in the year 2081). And if that 22-year-old does live to be 123 (the year 2114), he or she would need $791,808 per year.

Put another way, Porter says, the gallon of milk that costs $3.50 today (at least in some parts of the country) will, if inflation continues increasing 3% every year, cost $13.34 by 2058, when that 22-year-old is 67. And 101 years from now, that milk will conceivably cost $69.28 a gallon.

Your retirement plan needs to be flexible

You hear that a lot from financial advisers. The reason is that even if we don't have hovercraft skateboards and space buses to Mars in the near or distant future, the financial products available at age 123 will certainly look markedly different than they do now.

"Whether the time frame in which you're retired is 30 or 60 years, things will change," says Dan Danford, CEO of the Family Investment Center, a commission-free investment firm in St. Joseph, Mo. "Retirees need to maintain enough flexibility to adjust when they do. Inflation-adjusted bonds are one good example. They didn't even exist when my father retired in the mid-1980s. Exchange-traded funds are another example. What other helpful new products will come along before 2043? Without flexibility, how can you include new products when they do come along?"

You need to be flexible, too

If you're going to live off 4% or 5% of your nest egg annually, ideally you will have plenty of cushion built in, so you can only take, say, 3% if you need to. That's because your retirement fund needs to be robust enough to withstand the Great Recession of 2039 or the Great Depression of 2051 or whatever the economy dishes out.

"Try to cut back in the down years to make your money last," Flader advises.

Of course, it's impossible to offer up an actual number on what someone needs for their retirement. Some people are better at living on less than others. But you may want more than you think you will.

Consider that just this week, MSN Money ran an article about 102-year-old Floyd Pullin, of Confluence, Pa., who purchased a new Ford pickup truck -- his  16th Ford in a span of more than 80 years. It doesn't take much imagination to assume that saving for a retirement that lasts into the 120s may some day become the norm.

More from U.S. News & World Report:

Sep 1, 2013 11:14AM
By my calculations, this misses (or artfully glosses over) half of the equation.  Inflation is well covered above (and serves its alarming purpose), but, your portfolio, even when it is being drawn upon, is likely still growing even at a modest rate.  One does not withdraw all and stuff it in a mattress.  Also, the statement 'take no more than 4 to 5% as a draw from your savings', isn't quite on the money either.  Your draw percentage will start lower than that and gradually grow (as compared to the remaining portfolio total) over the years. Afterall, your principal IS MEANT to be slowly withdrawn.  Additionally, if it is still there, Social Security will help defray the total draw needed AND if a person had also worked to save an already taxed amount, say in a dividend paying brokerage account, not only are the dividends (that used to be DRIPd during the saving years) there to further defray the increase in draw, the stock itself is also available as a cushion.  This is what I found when I ran numbers, based on what I'm able to live on in a year (true take home), inflated to the date I plan to retire.
Sep 7, 2013 4:56PM
I love all these old people saying they paid in so much money into the system.  My mom and dad both started working when they were 14 years old.  They had good paying jobs and paid so much into the system.  My dad died when he was 66.  He received the whole some of 6 SS checks, but my mom is 83 and has been drawing for the last 16 years.  What really is taking the money for my mom is all the medical care.  She has had two knee replacements, three stays in the hospital, and broke her neck in March.  She was in the hospital for over a month.  Medicare has paid way over what she paid or my dad paid.  I am very happy that she is able to receive the care she has, but it is a drain on the country.  I had an aunt that had a stroke and was in a nursing home for 11 years.  She ended up on medicaid and it was way over 1 million for all the time in the hospital and nursing home.  None of these people paid more then they received except my dad.  I am not sure what the answer is, but to say you paid so much more than you will get out is just so untrue.  You will not know until you die.  Hopefully you will live a long, health life. 
Sep 7, 2013 4:15PM
I hate these "we are living longer" lies!!!  If you believe we are living longer, you may also believe the FDA approves junk pills to cure you too!!!  Pills are money!!! They are also like little snakes in a bottle, each giving you a bit of venom.  Short term pills, okay.  Long term pills will get you.  Listen to the "ask your doctor" ads. They tell you plainly they may kill you.  Look at any whitecoat office and see those who flock to them.  Look at your local obits.  Yes, you will see one now and then who lived to 100 but how many are gone in their 50's and 60's just before or after their first SS check!  We are dying sooner!  Syria kills 1400 in a week with chemicals. How many does the FDA kill in America daily with chemicals??? Syria is safe from US missles with Russian warships in place.  We are not safe from the FDA.
Sep 7, 2013 3:36PM
Can you imagine money is the  only problem in this freedom country called USA, I surely hope you are kidding!
Sep 7, 2013 6:50PM
Yes,yes yes. There has been much inflation  since I retired in  1986. Government wasteful spending . Congressmen are not going to change unless we stop it from being a career job.  Limit time in  congress to eight years and they won spend on stupid things to 'buy' votes.
Sep 7, 2013 4:58PM
Both my Mother and my Aunt had Altzheimers, they lived close to 100. When they wound up in the nursing home everything they nickel-ed and dime-ed and did without to save all those years was gone quickly, when some gov't program took over they got the same dreadful care, same place, same Dr, same everything. Doesn't that make people want to try and save for old age??? If you are half way smart with money management and don't live over your head most people will do OK until either the mind or the body gives out, if you live past 80 chances are about 1 in 4 you will wind up in a nursing home, if you make 90 it doubles to 50/50. Take a close look at how long your immediate family lived, add about 5 years and you've got about a75% chance that's your expectancy. Scary.
Sep 7, 2013 4:09PM

Life insurance coverage with most companies end at age 100, whole life. Others end before age 100. You must consider that in your retirement plan.

Sep 7, 2013 7:14PM
talk talk talk yadda yadda  yadda

if you are a  citizen of any  country you  should  expect  to be  provided  with  food   clothing   shelter  medical care  if you  cant  handle it  yOurself , other wise why  pay taxes  why go in their  army why do anything  for them?

and   for  gods  sake  stop  whining -------- nobody can  predict the  future  life will  be  what it  will  be

all we  can do is  compromise and the  europeans  got the  best  compromise and americans would  do well  to copy them------------- but they never will-------- too  selfish and  self  centered and  frankly  STUPID!!!!
Sep 7, 2013 8:51PM
Well I guess no one is ever going to retire then. What ? 2 million in the bank. Most people live pay check to pay check and there are no pensions anymore, so maybe we should all take up smoking so we can die younger. Oh, I guess thats what businesses would like , employees with no health care, no pensions, and working for minimum wage until death. I bet companies will go after the minimum wage next because we need jobs and have to compete with people in China making 10 cents an hour. RIght now companies are hording billions of dollars , not hiring people , or paying a decent wage and complain about Obamacare and all the taxes they pay. What a laugh, corporate taxes are lower now than they have ever been. Back in the 1950's tax rates could max out at 90% not the 39% they have now. Get real , government needs to give companies reasons for hiring people, providing medical care and pensions and companies that hord money and dont hire should not get any government contracts, federal or otherwise.      
Sep 7, 2013 8:03PM
The government can only give what they have and they have a lot. Collectively we pay a lot. Their is a tax on everything not only from the pay check. Home, sales, bank interest, investments, airline fees, cell phone fees, car tax, road tax, cigarette tax, commuter tax, tolls, utility and death tax.
Sep 7, 2013 8:32PM

Why in the world would anyone want to live to be 100 years old or beyond??? 

Sep 7, 2013 10:56PM
I am retired. We (my wife and I) live quite comfortably. I tend to be conservative with money. I have been advised that, given my present age and so-called life expectancy (based on averages), I should loosen up a bit and spend more. "You can't take it with you," they say, so spend it before you die. But, being a Great Depression baby, growing up poor, having gone through WWII, worked hard (and smart) for many long years, and having seen friends and family members end up being abused in squalid, non-caring nursing homes, on the chance that I just may live a lot longer, I remain conservative and plan for the time when I may be the one who has to live in assisted care. If I die and there is money left over and my relatives swoop in like the buzzards they are and fight over it (they won't because my will is structured so they can't), it really won't matter to me, then, will it. If one can live comfortably (and I know that word can be relative) and enjoy my "golden" years, that is enough for me. I have been like that all my life. I might have been richer when I retired had I sought to be, but my personal retirement plans were geared to living comfortably, period. So, I suppose that I denied myself many things I desired in my lifetime, but, on the other hand, I am comfortable in my retirement. Given that approach to living, it made retiring easier for me and means that, even if I live to be a hundred or longer, I will still likely be able to live comfortably. The single most important advice to young people has to be, start early and hold to a plan to support yourself comfortably in retirement. My quality of life today is essentially the same quality I had before retirement. I have zero debt and a balanced portfolio and other assets. It took discipline and some sacrifices over the years, however. And that is the key. That and make sure you find a good financial adviser to assist you (not a "broker"). Based on what the government calls income, I am a little over average, BUT my "income" is something I can control. I have enough in assets and investments to increase my "income" if I need it. I am lucky - but it didn't happen because of "luck." I planned for it, hard though it may have been at times. Unless you plan to commit suicide, none of us knows when we will die. I simply planned in such a way that, if I DO live a long life, I should be able to live comfortably. Think about it before you go into debt over your head and make the sacrifices necessary to guarantee a comfortable retirement. I started out dirt poor, so it isn't as if I had money handed to me. I made it the old-fashioned way, I earned it. Almost anyone can do it, with discipline and a little common sense. It isn't rocket science.
Sep 7, 2013 8:08PM
then why is the average life expectancy a lot lower then what is stated in this article.  Get real writers...  you all should do research prior to writing articles.  And yes, I agree with the statement below on all these so called pills/medication that the medical field keeps pushing on us.  This is why I am now taking herbals and I have never felt better.  Only reason most medical doctors and the FDA do not back up the use of herbals is because then it would mean less profit for them. 
Sep 7, 2013 8:10PM
I doubt the average or even above average income family. Can save enough money and have children. To be able to pay for their care until 100. If they do not have any children. Almost all their friends will be dead. At 100 years of age. Can you imagine living with at that age. That nobody cares about you.
Sep 7, 2013 5:12PM
Another fary tale story, they are exceptions of people living longer, but a big number will not get there,
with Monsanto and the GMO, the raise of cancer and diseases we are lucky if we can get to are 70 birthday, and less not forget Americans have to work, hard long hours and even 2 jobs, to "survive", (we are paying off the corruption and greed, lavish style of the rich to politician and corporations ), this is another way to try to convince us, the we can live longer, and rise the years till your retirement,
hey they needs your tax money,  and they are going to squeezes you dried like an orange.
Monsanto should be paying for are health insurance, if they want us to live to 100(since they are the one shorting are life cycle with there Man made food)

Sep 7, 2013 9:12PM
The idea of saving a nest egg and retiring on it, withdrawing 4%/yr just doesn't work anymore.  In many cases, it can lead to disaster.   If you want financial security when you retire, forget about building a nest egg and spend your working years developing multiple and diverse revenue streams.  Cash flow is king and in the future, wealth will be determined not by the alleged value of your assets, but by the amount of cash flow those assets can consistently generate.
Sep 7, 2013 11:38PM
So sit & choke on your money constantly worrying about it.  Do NOT enjoy life.  Begin to save while in the cradle.  Hey, maybe you'll live past 50!  What a totally asinine ridiculous article this is!  Gee, someone lived til 126 (maybe??)  Maybe it will happen for you - so SAVE FOR IT - start NOW - before you reach age 22.   Remember you've only got 104 years to squirrel away your loot!  And if you live until 127 (your social security might run out) - OMG!  IDIOTIC IDIOTIC IDIOTIC   How about seeing how far your 'health' & accident prone luck will take you.  Gee, I won't have enough money @ 126!  If I live that long - or live even to 80 or 70.    Geez.  What a dopey article.
Sep 7, 2013 6:54PM
Regarding P.A.'s comment, I wholeheartedly agree with the former and strongly disagree with the latter. Those of us who are current Social Security recipients are, for the most part, merely withdrawing that which had been set aside for us to cover our expenses at this time. Now though, what with inflation, the recession, the economy and the "do-nothing-at-any-cost" attitude of the politicians' of this country, it looks like the Gen X'ers will have to use  their inventive intellect to plan for the "new" retirement wherever that leads.
Sep 7, 2013 7:05PM
I don't know about you but I would rather NOT wake up in the morning.  Living in THIS society is NOT something I want.  They can keep this Sodam & Gamorrah, I'd rather be dead.
Sep 7, 2013 11:17PM
Can you imagine a day where a gallon of milk is $70.00.....I can't. Scare tactics. That's all this is.
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