How to invest for a long retirement

INCREASED LONGEVITY adds a new wrinkle to retirement income planning since assets may need to stretch for 20 to 30 years.

A common question: How much is enough for retirement? It’s something every investor needs to ask, especially if they anticipate living well into their 80s, 90s or beyond.

The typical investor is underprepared to meet the challenges and realities of a longer retirement, says Michelle Merkel, president and founder of Merkel Financial Services in Columbus, Ohio. «Preparing for retirement is not simply about having a certain amount of money set aside in savings; it’s about defining your needs.»

That’s important for managing cash flow effectively in the earlier and later stages of retirement. Meeting the various challenges of planning for an extended retirement begins with asking these questions:

• What Is a reasonable amount of money for retirement?
• Does a long retirement require a different investment strategy?
• How can retirement assets be made to last?

What Is a Reasonable Amount of Money For Retirement?

It’s a simple enough question but answering it can be tricky.

«The reality is, the number is different for everyone because everyone has different facts and circumstances,» says Bill Bruns, managing director at MAI Capital in Cincinnati.

Investor A, for instance, might be wondering whether they can retire with $2 million and live comfortably, while Investor B might ask: «Can I retire at 60 with $500k saved?»

When determining a target number, Bruns says investors would do well to consider their desired lifestyle first and their guaranteed sources of retirement income second. Those guaranteed sources of income can include Social Security benefits, pension payments from an employer or annuity payments. Guaranteed income can provide a financial anchor in a long retirement for investors who are concerned about whether their 401(k), individual retirement accounts or taxable investments can go the distance.