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Will You Outlive Your Money?

WillYou Outive Your Money?

Can you predict how long you’ll live? People have turned to real age calculators, family history patterns and fortunetellers for years to get the answer. But new research suggests that our best estimates of our likely lifespans are wrong – way wrong. And it turns out that underestimating the length of your life can have some serous financial consequences.

According to a new Newser article, when researchers at the University of Michigan began their study in 1992, they asked 28,000 Americans ages 51 to 61 whether they thought they’d live to be 75 years old. Over two decades later, researchers found that nearly half the people who thought they wouldn’t make it to 75 were still alive and kicking.

That’s reassuring news, but it has a downside. In an era when nearly two thirds of Americans nearing retirement age say they worry about having enough money to carry them through, and benefits from Social security and pension plans are becoming increasingly iffy, there’s real cause for concern about how to fund those unexpected later years.

For those entering the “Third Age’ of adulthood, it’s a different world than the one that previous generations entered when they retired. When the concept of retirement was new, people could expect to live a decade or so, if that, after leaving the working world. And there were usually family members around to help out and take up the slack. Living expenses were lower, and after putting in the required number of years on the job, retirees could expect a pension check that would keep them comfortable as long as they needed it.

But today, living costs are higher. Many people nearing retirement age haven’t had the stable work history enjoyed by their parents. Layoffs, downsizing and other employment issues have mad it impossible for many people to put in the time ion the job needed to retire with a pension – or to save for that second life while taking care of the first.

And even if they did, today’s pensions are more vulnerable too. Bad investments and poor management have left many people facing retirement with employers’ pensuon funds either bankrupt or compromised. Employers are expecting workers to match their contributions or cutting back on retirement packages, leaving even long time workers on their own for covering retirement living expenses.

For many, Social Security is a fallback. But Social Security Agency officials are quick to point out that Social Security benefits have always been intended as a safety net to supplement other sources of retirement income. And while the SSA stresses there’s no need to worry, many fear that eventually Social Security itself will run dry.

Even with stable sources of retirement income, authors of the longevity study point out that if Americans are being unrealistic about the length of life they can expect, that means they’re also not facing other issues that those longer years might bring: health crises, the need for assisted living or long term care.

Worries about funding retirement have given rise to several possible solutions. Reverse mortgages promise to pay a homeowner a monthly amount instead of the usual mortgage arrangement. Life insurance, annuities and other kinds of trusts can also take up the slack.

But there are downsides to these arrangements. Some may not leave much for heirs to inherit. Others pay out only small amounts. And there’s no real opportunity to generate more money.

That’s why income property investing can be a solution. Rental properties, when acquired the right way, provide a cash flow that can continue as long as the owner/investor chooses. Bought with a standard fixed rate mortgage, income property lets investors keep their money in the bank for any needs that might arise.

As Jason Hartman points out, equity in the home you own is finite – and it may not be the stable source of income a new retiree needs to fund all those years ahead. Leveraging the power of other people’s money allows investors to build wealth, not just stay afloat. And that wealth can benefit future generations too.

Now, people are living longer than ever. Today’s retirees could spend a full third of life after leaving the work force – even if they don’t expect to. Investing in real estate – that most stable of all assets – is a way to build wealth and enjoy those unanticipated extra years. (Featured image: Flickr/ankakay)


Oler, Arden. “We Live Way Longer Than We Expect.” Newser. Newser.com. 14 Nov 2104

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