3. Underestimating how long we will live.
Longevity risk is one of the main factors that cause concern as to whether we will have enough money to live out our lives in the kind of lifestyle that we would like to.
Current life expectancy for females is 81.2 years and for men it’s 76.4 years. That difference of 4.8 years could make a big difference later on. In many cases, wives are younger than their husbands, so if a wife is 3 years younger than her husband, then we need to plan for finances for her 8 years after his death.
The death rates for heart disease and cancer, the two leading causes of death that account for 46.5% of all deaths, have been falling since 1999.
In 1950, men were expected to live to age 65.6 and women to age 71.0. That means that medical technology and adjusted health habits have caused us to add 10 or 11 years to plan income for since then.
Most of us WANT to live longer. We just need to plan carefully in our calculations for those later years.
4. Focusing on financial products instead of strategic planning
When we ask most people what they expect from a Financial Advisor, it typically comes around to something like – “How much money do you have? Where is it? Move your money to me and I will get you a better rate of return”
There is so much more to where you put your money than just rate of return. Obviously, for most investments, the higher the return, the higher the risk. Sometimes your financial STRATEGY could make more of an impact on your future finances than just a rate of return.
One example – Something like “sequence of returns” could have a major impact on how long our money will last when we are withdrawing income and having a strategy in place to prevent that could make a difference of hundreds of thousands of dollars.
It could be way more important sometimes to prevent the losses rather than always trying to pick the winners.
To see #1 and #2 click HERE
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