In Part 1, I posed the question “Are you ready for retirement?” If you’re like me, you answered “YES!” right away. But it’s really kind of a trick question. More of a 2-part math problem to solve. First, ‘do you have enough money’? Hopefully you’ve had a chance to visit the website I mentioned to find out the answer. Second, ‘do you know how to make it last’? A much tougher question, which I’ll address today.

Let’s begin by talking about how long retirement will last. No, we can’t predict it, but we have to start somewhere, so let’s say it’ll last 30 years. Based on that, many financial planners suggest following the “4 percent rule”. According to Gail MarksJarvis, it “refers to how much you can afford to remove from your savings each year . . . and avoid the risk of running out of money”. Here’s the basic idea: you take out (use) 4% of your savings the first year, then adjust the next year based on expenses, inflation, and general cost of living. For example, if you have $500,000 saved up, you’d use $20,000 that first year, then take a look at your finances and decide how to proceed. Do you need a bit more? Could you do with less?

Be careful about taking more, though, says Gail. Taking 5-6% per year could spell disaster later on, and yet 16% of the retired people who took that original quiz said they thought they’d be safe taking 6-8%. Chances are they’d run out of money. Not good.

There are steps you can take to help ease the uncertainty of making your money last. First, don’t put all your eggs in one basket. Bill Bengen, creator of the “4 percent rule”, says a more diverse portfolio is best. Invest in stocks and bonds, for example, instead of just one or the other. (And don’t just let it sit in the bank – the return is terrible!) Second, Gail MarksJarvis says that you need to consider how much things will cost. We don’t know exact numbers now, of course, but we can make an educated guess based on current prices. Third, keep in mind the effects of a spouse’s death because that could mean getting reduced Social Security and even the loss of their pension. That will most definitely affect what you can spend. Finally, MarksJarvis suggests waiting until you’re 70 years old before starting to collect Social Security. If you’re healthy and family genes point to a long life, you’ll be better off if you wait.

Of course, in my opinion, good money management is key to making sure you set aside enough throughout your working life to live on during retirement, but also to help you make it last. And I feel it’s never too late to start. Luckily, there’s a book for that.