How Can You Help Lower Your Longevity Risk?

Submitted by Edward JonesPrint Story | Email Story

The investment world contains different types of risk. Your stocks or stock-based mutual funds could lose value during periods of market volatility. The price of your bonds or bond funds could also decline, if new bonds are issued at higher interest rates. But have you ever thought about longevity risk?

Insurance companies and pension funds view longevity risk as the risk they incur when their assumptions about life expectancies and mortality rates are incorrect, leading to higher payout levels. But for you, as an individual investor, longevity risk is less technical and more emotional: it's the risk of outliving your money.

To assess your own longevity risk, you first will want to make an educated guess about your life span, based on your health and family history. Plus, you've got some statistics to consider: Women who turned 65 in April of this year can expect to live, on average, until age 86.5; for men, the corresponding figure is 84, according to the Social Security Administration.

Once you have a reasonable estimate of the number of years that lie ahead, you will want to take steps to reduce your longevity risk. For starters, try to build your financial resources as much as possible, because the greater your level of assets, the lower the risk of outliving them. So, during your working years, keep contributing to your IRA and your 401(k) or similar employer-sponsored retirement plan.

Then, as you near retirement, you will need to do some planning. Specifically, you will need to compare your essential living expenses – mortgage/rent, utilities, food, clothing, etc. – with the amount of income you will get from guaranteed sources, such as Social Security or pensions. You do have some flexibility with this guaranteed income pool. For example, you can file for Social Security benefits as early as 62, but your monthly checks will then be reduced by about 30 percent from what you would receive if you waited until your full retirement age, which is likely between 66 and 67.

You might also consider other investments that can provide you with a steady income stream. A financial professional can help you choose the income-producing investments that are appropriate for your needs and that fit well with the rest of your portfolio.

After you have determined that your guaranteed income will be sufficient to meet your essential living expenses, have you eliminated longevity risk? Not necessarily – because "essential" expenses don't include unexpected costs, of which there may be many, such as costly home maintenance, auto repairs and so on. And during your retirement years, you will always need to be aware of health care costs. If you have to dip into your guaranteed income sources to pay for these types of bills, you might increase the risk of outliving your money.

To avoid this scenario, you may want to establish a separate fund, possibly containing at least a year's worth of living expenses, with the money held in cash or cash equivalents. This money won't grow much, if at all, but it will be there for you when you need it.

With careful planning, adequate guaranteed income, a sufficient emergency fund and enough other investments to handle nonessential costs, you will be doing what you can to reduce your own longevity risk. And that may lead to a more enjoyable retirement.

This article was written by Edward Jones for use by your local Edward Jones financial advisor. Courtesy of Rob Adams, 71 Main Street, North Adams, MA 01247, 413-664-9253.. Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation. For more information, see

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North Adams Auctioning Off 10 Properties in October

Staff ReportsiBerkshires
NORTH ADAMS, Mass. — The city will be auctioning off 10 properties this October, expected to be the first of number of lots to be sold. 
The auction will take place on Thursday, Oct. 15, at Joe Wolfe Field at 11 a.m.
The Community Development Office has been developing a strategic plan for disposing of  "functionless" properties — those that are not in service or generating revenue. The city can dispose of properties through auction, sale to abutters and requests for proposals.
The 10 properties in question include four conforming lots with and without structures and six nonconforming lots suitable for abutters to expand their holdings.  
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