GOLDEN VALLEY, Minn. - It's no secret a million dollars just isn't what it used to be.
In 1953, when "How to Marry a Millionaire" was in movie theaters, $1 million dollars bought the equivalent of $8.7 million today.
Still, $1 million dollars is more money than 9 in 10 American families possess.
While It may no longer be a symbol of boundless wealth as a retirement nest egg, it's relatively big and regardless of the size of your nest egg, there are some good financial reminders retirees need.
Inflation erodes your nest egg - Consider this; at a 3% inflation rate your cost of living DOUBLES in about 23 ½ years. It is essential to factor rising costs when planning your retirement. A million dollars isn't what it used to be - In 1953, when "How to Marry a Millionaire" was in movie theaters, $1 million bought the equivalent of $8.7 million today, 60 years later.
Monitor your withdrawal rate - While many suggest a 4% withdrawal rate from your financial assets is a reasonable level, keep in mind there are a variety of variables that affect this assumption. Inflation, your investment return and the related volatility that is inherent in the financial markets all need to be considered. For example, during the last bear market what used to be a 4% distribution rate may have been 6% given the decline in assets presuming you kept your withdrawals unchanged. Being flexible if possible with withdrawals during the inevitable market declines will improve the likelihood that your assets last as long as you do.
Options to make your nest egg last
- Save more / Spend less - Save more (if you aren't retired) or spend less if you are retired ... keeping a keen eye on the withdrawal rate referenced above
- Rethink your investment allocation - While analyzing investment strategies may give you a headache, it is an important task to craft a mix of investments that will meet your risk and return parameters through a variety of market cycles.
- Work longer - An annual survey for the Employee Benefit Research Institute found that in 1991, only 11 percent of workers expected to retire after age 65, while this year, 36 percent said they would retire after 65 - and 7 percent said they didn't plan to retire at all. Need another reason to keep working? A new study finds that staying in the work force can delay dementia.
Tapping home equity later in retirement