We’ve always been told that longevity is a reward for living well, but the reward of a long life is tempered by the risk of longevity. If you’re not familiar with the term, it refers to the cost of living in retirement, and the real possibility that those blessed with a long life will run out of retirement savings.

Thanks to modern medicine, life expectancy is increasing all the time. Men who retire at the age of 65 can expect, on average, to live an additional 17 years. Women can expect to live an additional 20. Unfortunately, one’s retirement planning may not have planned on living to 85 years of age, and may not have anticipated the frightening increases in the cost of health care.

If you’re still planning for your retirement, you still have time to act. Retirement investment strategies should be re-evaluated and corrective measures should be taken if it appears as though your retirement accumulations will not sustain you for 25 years after retirement.

If you’re behind in your savings, one great way to pump up your investment portfolio is by acquiring high-performing investments, like Puerto Vallarta real estate. For the past 10 years, Puerto Vallarta real estate has appreciated at the rate of 10 percent or better per year.

Puerto Vallarta real estate can support your retirement planning in two ways: first, Puerto Vallarta real estate has high resale value, and can also be used as a very consistent income producer if you plan to rent the property. If income isn’t your primary goal, Puerto Vallarta real estate can help you reduce your cost of living by 50% to 75%. Long-term residency in Puerto Vallarta also provides tax benefits. (The taxes here are low to begin with, but tax residency does have its perks!)

Puerto Vallarta is very friendly toward retirees and will provide a very high quality of life for those who choose to reside here part-time or full-time. No matter how you use a luxury property in Puerto Vallarta, you can hardly lose!

Photo Credit: Ginny Austin

“How much in retirement savings do I need?” is the one question that dogs people as they plan for life after work. The real answer is impossible to know, but you can make retirement plans based on the cost of living in your area, your current expenses and the savings you have amassed.

While I was researching this question, I saw an interesting example that neatly illustrates a point – just not the one the author was trying to make! The hypothetical example involved a person who made $80,000 annually for retirement and had a retirement savings account worth $500,000. Assuming a four percent annual draw-down (the maximum amount most investment advisors recommend withdrawing), that would leave our hypothetical retiree with an annual income (before taxes) of $20,000.

I’m not you and you’re not me, but I wouldn’t want to try to downsize my lifestyle by 75%, retired or not! (Would you?) One-third of workers plan no major spending changes after retirement – much less a 75% drop in income! Even if you supplement that $20K with Social Security payments – the current average is about $1,100 monthly – you’d have a maximum annual gross income of $33,200. Depending upon where you live, your health coverage and your expenses, that might work for you or it might not.

Some experts estimate that a person over 65 can expect to spend as much as $250,000 during the remainder of his or her lifetime on unpaid or uninsured medical expenses. If our hypothetical retiree needs to reserve half of that nest egg for medical expenses, s/he just took a 50% pay cut on top of the 75% pay cut s/he received upon retirement.

For me, that hypothetical example illustrates the need to live cost-effectively. Rather than downsize your lifestyle by 75%, wouldn’t it make sense to move someplace where things cost 75% less than they do here? To me, it makes more sense to make your dollars go as far as possible than squeeze into an uncomfortable retirement lifestyle and risk running out of retirement savings when you’re too old to go back to work.

Think such a place doesn’t exist? Wrong. The cost of living in Mexico is 50% to 75% less than it is in the US. Major expenses – housing, food, medical and dental care, prescription drugs, transportation and energy are all highly affordable here. The weather is beautiful and prime real estate is a bargain. Before you dismiss a Puerto Vallarta retirement, ask yourself this: how much of a pay cut are you willing to take when you retire?

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The Risks and Process of Retirement Survey Report, a new study by the Society of Actuaries, indicates that the top retirement planning concern right now is the rate of inflation. Maintaining the value of assets, having enough money to pay for long-term care, affordable health care and simply having enough savings to maintain a decent standard of living after the death of a spouse.

Nearly one-third of women over the age of 65 and nearly one-fifth of men in the same age bracket can expect to live past the age of 90. Whatever the reward that longevity brings is quickly counter-balanced by the risk of exhausting retirement savings. For women, the threat posed by inflation is alarming. Without proper investing, planning and saving, a woman is likely to suffer a decline in her standard of living after the death of her husband.

One approach to countering this risk is to buy income producing investments, and investments whose values appreciate faster than the rate of inflation. In this economic situation, investments that fit these descriptions are hard to find. Traditional real estate investments, which could be counted on for moderate but steady growth, are stagnant or in some cases, declining in value.

Recently however, investors have shown significant interest in real estate in Latin America. One of Latin America’s hottest real estate markets is Puerto Vallarta. Puerto Vallarta is located on Mexico’s Pacific coast and offers a climate similar to that of Hawaii. The cost of living in Puerto Vallarta is comparatively low. Most major expenses, including health care and prescription drugs, can be reduced by 50% to 75%.

By reducing the major expenses in retirement – housing, health care, energy, food, and medicine, retirees could not only live more comfortably, but also could reasonably expect their retirement savings to outlive them even if they enjoy an extended lifespan.

Adopting strategies that combat inflation are especially important for retired women, who live an average of three years longer than men. This approach may also support individuals whose retirement savings have been compromised by the serious illness of a spouse or the need to pay for long-term care.

You can read the Society of Actuaries report on Understanding And Managing The Risks Of Retirement here. Warning: PDF link

Photo Credit: Adrian van Leen

US investors are deeply concerned about the status of their retirement savings. Recent studies have indicated that American workers are not saving enough for retirement. A new study by HSBC indicates that Americans are in good company. Worldwide, indications point to an entire generation of people who do not have sufficient retirement savings.

Currently, a very small percentage of working individuals are well prepared for retirement. At the opposite end of the spectrum are a large number of people who are categorically unprepared for retirement. These people will always struggle to get by and may never be able to exit the workforce. For the people in between, the picture is not so clear, but there remains a significant chance that this group will also be unprepared for retirement.

The HSBC study indicates that the single biggest risk for coming up short in retirement is relying on a single source of retirement income. Worldwide, different groups prefer different investment vehicles for retirement savings, but the real risk is not so tightly tied to the retirement savings vehicle as it is to the diversity of income sources.

If you’re looking for a way to diversify your retirement savings, the purchase of real estate in emerging economies offers the potential for significant gains. Right now, Mexico is one of the hottest emerging economies and Puerto Vallarta is one of the hottest real estate markets within Mexico. There is no better time to invest in real estate here. Currently, property values are rising at a rate of about 10 percent per year. This condition has been present for the past ten years and experts believe that double-digit growth here will continue for at least the next five years.

It’s never a bad idea to diversify your retirement savings, as long as you can find a safe, reliable investment vehicle. Right now, Puerto Vallarta real estate seems to be the best offer on the table in term of value, stability, and growth potential.

Photo Credit: Jorge Vicente

A new survey from Bell Investment Advisors and Opinion Research Corp., says that nearly one-third of 60-year-olds with investable assets of $1 million or more doubt that $1 million in retirement investments is sufficient. Another forty percent of people in the same age range are reducing their expenses by cutting their charitable contributions, shifting vacation plans, cutting their retirement savings or delaying retirement. More than half – 54 percent – said that finding higher performing investments will be their primary investing goal for the next five years.

In that case, it’s not surprising that investors are looking at high-performance real estate as a good way to meet their primary investing goals. While real estate values in the US have been stagnant or declining, Puerto Vallarta real estate has been soaring. For investors looking for a high rate of return, purchasing the right Puerto Vallarta property can produce outstanding results.

So what is the best advice for investors who are worried about the value of their assets? Applying a balanced investment strategy to a portfolio can help it weather downturns in one or more sectors. If your portfolio isn’t well balanced, adding some high performing Puerto Vallarta real estate can help you reach your investment goals regardless of the state of the US markets.

Photo Credit: Steve Woods