by John Darer
Most people have problem determining appropriate long term spending levels. Lack of education on the subject is clearly the root of the problem. Yet if left uncorrected, the long term ramifications of this deficiency could be a devastating impact on retirement, critical care or survivor financial security.
According to a survey** conducted on behalf of New York Life Insurance Company released in May 2006, nearly half of the Americans surveyed between the ages of 41 and 92 overestimated the percentage of their assets that they could safely withdraw annually without running out of money ("the safe withdrawal rate"). While published reports say that experts benchmark at 4% annually for the typical retiree, a surprising 40% of respondents to the New York Life commissioned survey admitted that they do not know how much to withdraw without spending down their savings. The study demonstrated that there is a great risk among the 29% of all respondents who believe they can spend 10% or more of their savings each year. Wow! 40% apparently haven't a clue and 29% apparently overestimate! Such retirees risk dissipation of their assets at a time when life expectancies are increasing!
The same principles apply to claimants or plaintiffs settling a medical or hospital malpractice, construction accident, airline crash, automobile accident, trucking accident, mesothelioma, product liability or other personal physical injury claim or lawsuit. A structured settlement should always be considered as part of the resolution of their case as a financial vehicle to provide that stable base of (income) tax free income and/or future capital regardless of a plaintiff's level of investment sophistication.
Education and implementation can be provided by experienced and credentialed structured settlement brokers, settlement planners and financial advisers familiar with such matters.
**The survey examined the retirement planning attitudes and behaviors of 1,002 financial decision-makers with assets of over $100,000, ages 41 and over, with a particular focus on income in retirement.