Retirement Wiz: How to avoid running out of money in retirement

I just came across a very informative report that I'd like to share with you today. It's called "The 15-Minute Retirement Plan: How to avoid running out of money when you need it most", prepared by Fisher Investments.

For a FREE copy of this report, click on the image below:

Here's a brief summary of what I believe are key points in this report, plus some of my own thoughts on the subject:

Running out of money is one of the worst things that can happen to a person in retirement. You might work your whole life saving for your future and then find out that you don't have enough money to last for the duration of your life.

To avoid this happening to you, there are several key factors that you need to consider:

1. The length of time that you will need to save for. Many people underestimate their life expectancy. In 1952, the average lifespan was 68.6 years. In 2006, that had increased to 77.8 years. And, with continuing improvements in medicine and healthcare, it's expected that life expectancy will only continue to increase.

What does this mean to you? Expect to live a long time and build this into your savings plan for retirement. Below is a 2006 life expectancy table from the IRS to help you with this.

Age.....Life Expectancy
51-----------84.3
55-----------84.6
60-----------85.2
65-----------86.0
70-----------87.0
75-----------88.4
80-----------90.2
85-----------92.6
90-----------95.5

2. The effects of inflation. Many people believe that if they're earning 10% per year on their portfolio, that they can withdraw 10% per year without reducing their principal. This isn't correct. They forget to take into account INFLATION, which historically has averaged 3% per year. So the real earnings for their portfolio is just 7% per year (10%-3%=7%). If they're withdrawing 10%, they are actually reducing their principal every year.

More on inflation: it has a compounding effect on your cost of living. If you need $50,000 per year today to cover your living expenses, in 20 years you'll need $92,000 to keep the same lifestyle. In 30 years you'll need $125,000. You get the point.

3. The amount of money you withdraw from your retirement portfolio each year. The amount of money that you withdraw each year obviously will affect how long your money will last. Here are three scenarios based on an average 10% annual return on a $1 million portfolio over a 30-year time horizon, adjusted for inflation:

* Withdraw 10% per year: the portfolio will last approx. 18.2 years
* Withdraw 7% per year: the portfolio will last approx. 24.2 years
* Withdraw 5% per year: the portfolio will last approx. 27.9 years

4. The makeup of your retirement portfolio. In particular, if you're heavily into stocks, you must take into account the volatility of the stock market. If you need to take 10% withdrawals each year and take it in a year when the market and your portfolio are way down, you could significantly cut into your principal. To illustrate: if your portfolio has declined 20% this year due to a stock market downturn, and you withdraw 10%, you'll need your portfolio to grow 39% next year just to get it back to even.

What can you do?

I recommend that everyone take a good look at raw land development investments for their retirement portfolios.

Here's why:

Though nothing is certain with any investment, raw land development is one of the most lucrative investment vehicles available to investors. And that includes stocks, bonds, commodities, other real estate products, etc. Professional land developers commonly increase the value of their raw land investments by 200-500%. And it can be much higher. (I consider that pretty lucrative.)

These investments are typically secured by the value of the land being developed. This is in contrast to stocks where there is really no security at all.

Land developers do not rely on market appreciation for their profits, unlike residential real estate. Instead, they CREATE value by taking raw land, obtaining government permits and approvals to rezone the land so it can be subdivided and built upon - then they resell these newly approved lots to production builders for typically 2-5 times more than the land developer paid for the land. So, there is typically far more stability and much less volatility.

To learn more about raw land development investments, click on the picture below: