Wildly Different Retirements

Two noteworthy people died recently:

• Edward Rondthaler, a renowned typesetter and typographer, who was also famous for advocating spelling reforms. He was a big fan of phonetic spelling -- and his obituary in The New York Times referred to him accordingly, as a "Foenetic Speler."
• Michael Mazur was an artist, specializing in printmaking, painting, and sculpture. His work ranged from abstract to realistic, from social commentary to landscapes.

Something jumped out at me when I saw their obituaries listed next to each other: Mr. Rondthaler died at age 104, while Mr. Mazur died at age 73.

People die at all ages. But this stark juxtaposition serves as a useful reminder that most of us really have no idea how long we'll live. We may end up surprising ourselves. And if we do, we'll need enough of a nest egg to keep us comfortable for all those pleasantly unexpected years.

Retirement ramifications
If you retire at age 65, you'll end up with a whopping 39 years of retirement -- a span nearly as long as your entire employed life. Depending on how financially prepared you are for such an outcome, your retirement may turn out wildly different from what you expected -- and not in a good way.

Will the money you're saving and investing, and the nest egg you plan to amass, be enough to carry you through to age 100 or beyond? Unbeknownst to many people, the answer (for them, at least) is no.

To figure out whether you're one of those unfortunates, start with your expected nest egg at retirement. (For help estimating it, you might use a compounding calculator.) Per our Rule Your Retirement newsletter, and based on research, you should conservatively aim to withdraw 4% of your nest egg annually (adjusting it for inflation each year) to make it last. So if you expect to end up with $800,000 (congrats!), ask yourself whether you'll be OK with a withdrawal of $32,000 in the first year (that's about $2,700 per month).

If that won't be enough, you'll need to make some changes.

What to do
Stop gnashing those teeth -- you have a bunch of options!

• Invest more effectively. Do you have 50% of your assets in bonds, even though you're 20 years from retirement? You might want to have more of your money in stocks. In our Rule Your Retirement newsletter, Robert Brokamp has suggested keeping only a small amount of your money in bonds until you're 10 years from retirement -- since stocks tend to outperform bonds handily over long periods.
• Work for a few more years. Just two more years can give you tens or hundreds of thousands of additional dollars in retirement. And working seven more years might even give you an extra million. (Yes, an extra million, even if you have only $100,000 at age 40.) 
• Add more dividend-payers to your mix. Imagine taking 4% of your nest egg out each year to live on, while some of your remaining assets spit out more than 4% in dividends. Dividends can help keep your nest egg plump by generating their own income for you. The following companies enjoy sizable dividend yields and favorable ratings from our Motley Fool CAPS community of investors:

Source: Motley Fool CAPS.

Take control
Let the long and not-as-long lives of Edward Rondthaler and Michael Mazur spur you to action. Make sure that your retirement planning is on track to best position you for a comfortable last few decades of your life.

Learn more:

• The Next Incredible Buying Opportunity
• The 3-Step Plan to Restore Your Retirement
• I Turned $3,000 Into $210,000