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I hope my funeral home check bounces!

I hope my funeral home check bounces!

| May 19, 2024

I was chatting with a 401k client about retirement, spending, and longevity when he offered up this pithy comment. "I hope I bounce my check to the funeral home bounces." In other words, he hopes to die just as he uses up all of his money and correspondingly the check to the funeral home, written after his death, will bounce. We both had a good chuckle about this.

Point being, no one really knows how long they are going to live. We can provide a good guess on how much money is needed to fund retirement but many factors go into that. Where will you live in retirement? San Francisco's Nob Hill is a more expensive place to live than parts of Detroit, for example. What will you do in retirement? Stay local or travel every month? And what will your lifestyle be? Simple? Extravagant? Somewhere in between? Will it change year by year? Your financial requirements will vary as well.

Some financial projections suggest people should plan on living to age 95. That number is more than likely derived from actuarial tables. You might look at your own family and see if that age is realistic. You should also factor in whether the family members you are looking at had any extenuating circumstances that might have contributed to when they died.

I remember one client who lived in a small town in California. About the most exciting thing to happen in the town was the annual 4th of July parade down Main Street. She expected her days to be full of staying in her apartment with her cat for companionship and her crossword puzzles for mental stimulation. Imagine my surprise when she called me from Bourbon Street.

My first thought was, "I didn't know her town had a Bourbon Street". She then bellowed into the payphone (no cell phones back then), "I'm in the French Quarter". Apparently she had found a bunch of senior citizens who liked to travel at a slow pace, enjoyed eating earlier in the evening, and were in bed by 8:30 PM every night. My second thought was, "What happened to the cat and crossword puzzles?"

Suffice it to say, it was important to review her expecting spending.

Another client had quite a bit of money saved up. In fact, when I ran the projections based on her budget, I found she would still have a fair amount of money left by age 95. She proudly showed me her list of non-profits that would get her funds when she passed away.

What I advise my 401k clients is to save as much as possible. In 34 years in financial services, no one has ever told me they have too much money. Longevity is hard to predict and it is just one factor that feeds into how much a person will need each year in retirement. The more clarity that can be gained around lifestyle, spending preferences, and residence, the better the projections can be.