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According to the folks at PBS Frontline, retirement is a gamble at best. One way to increase your odds of success is to use conservative assumptions. As a financial advisor I generally use conservative assumptions in all aspects of client financial planning.

If you’re concerned about running out of money during retirement, you need to be realistic and conservative with your assumptions. Here are 8 conservative assumptions for you to consider:

Assume you will need 100 percent of your current income in retirement

Many rules of thumb suggest you’ll need between 70 and 100 percent of your pre-retirement income in retirement, but plan on at least 100 percent to be safe. Today’s retirees are active, they want to travel, pursue hobbies, and live a generally active lifestyle. This costs money. Even though you will likely slow down a bit as you age, medical costs later in retirement will likely rise and may replace what you were spending on activities and travel earlier in retirement.

Add extra years to your life expectancy

We are all living longer with advances in medicine and the like. Many factors come into play here including the history of longevity in your family.

Reduce your estimates of Social Security benefits

The youngest of the Baby Boomers can likely count on Social Security as we know it but I’m guessing that those younger than 50 may see reduced benefits. In the interest of being conservative, I suggest that you take your current estimate from Social Security and reduce it by say 25%. If things work out better that’s great, if not then you’ve planned and saved accordingly.

Cut back on your living expenses now

This not only frees up money to set aside for your retirement, but it helps you adjust to a potentially lower standard of living in retirement.

Be conservative with your investment expectations

We are four plus years into a stock rally and the stock market is at record levels. For investors nearing retirement it is a good idea to adjust your portfolio and expectations regarding investment returns accordingly.

Rethink early retirement

Saving enough to last from age 65 to age 85 or 90 is a difficult task. Trying to retire at age 55 or 60 is just not practical for most individuals, unless you’re willing to significantly change your lifestyle. Working a few more years can go a long way in helping fund your retirement. Those years are typically your highest earning years, so hopefully you’ll be able to save significant sums during that period. Also, every year you work is one year you don’t have to support yourself with your retirement savings.

Consider working during retirement

Especially during the early years of retirement, you should consider having at least a part-time job. Even modest earnings can help significantly with current retirement expenses help delay the need to withdraw money from your retirement accounts at least to some extent. Additionally this can be a great way to transition to “full retirement” especially for those retiring early.

Take conservative withdrawals from your retirement accounts

Don’t plan on taking out more than 3 to 4 percent of your balance annually. The “four percent rule” is a handy rule of thumb, but it is just that. Everyone’s situation is different. It is best to start with a detailed retirement expense budget and then determine what your investments and other sources of income can support.

The best retirement planning strategy is to have a financial plan in place. Monitor your retirement accumulation progress against the plan’s benchmark and make adjustments as needed in areas such as the amount you are saving, your investment allocation, and the lifestyle that your resources will support. Always be conservative in your planning, it’s much better to have more than you planned on than to hit age 80 and realize that you are out of money.

Approaching retirement and want another opinion on where you stand? Not sure if you are invested properly for your situation? Check out my Financial Review/Second Opinion for Individuals service.

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