Retirement Income Planning
Cost of Living
At retirement, your whole financial life essentially collapses down to one two-part question. Will your money outlive you, or will you outlive your money?
Most people aren't sure which retirement outcome they're going to get in part because they didn't know that that's the overriding question.
A non-smoking couple whose average retirement age is 62 has a joint life expectancy of 30 years. In English that means the second person will die at age 92. I caution you that like all actuarial numbers, that's an average.
At trendline inflation of 3%, the cost of living will rise nearly two and a half times in those 30 years. That is, it will cost about $2.40 in the 30th year of retirement to buy what a dollar bought you in the first year. If you haven't got a plan to increase your income about as much as your living costs are going up in retirement, then you may, in fact, have a plan for running out of money.