Re-Evaluate Retirement Goals Based on Longer Life Expectancy
There are many unknowns when planning for your retirement, especially regarding how long you can expect to live. Most financial planners base calculations on a life expectancy of 90 to 95 years, but what is your real life expectancy? What impact will a longer life have on your retirement?
Federal government statistics reveal that the life expectancy of a male born today is 73 years and a female is 79 years. However, these numbers are somewhat misleading, because if you make it to retirement age, then you can expect to live longer than the average. If you are a man who turned 65 in 1995, you could expect to live an additional 15.6 years – to age 81. A woman who turned 65 at the same time could expect to live an additional 18.9 years, to almost 84 years. Every time we reach a new milestone, our overall life expectancy increases. The increases in longevity prevailed throughout the 20th century, and there is every indication that the upward trend in average lifespan will continue.
Another twist in the life expectancy calculation is that half of those who reach a milestone age will live beyond that age. As the government continues to collect and analyze data, we see that the 65-year-old man in 1995 has an even greater chance of living beyond age 81. In fact, living into your 90’s is no longer rare. When looking carefully at the numbers, we see that almost one-third of men and almost one-half of women who reach age 65 will reach age 85!
How do these calculations fit in with your retirement planning? They assist you in avoiding a worst-case retirement scenario – outliving your savings. During your golden years, you will be living from money in your 401(k) and IRAs, and maybe from a pension. If you are one of the lucky 65 year-olds that live to be 85, but you only planned to live to age 73, you may be struggling to make ends meet. Using this reasoning, it is vital that your retirement planning extend beyond your expectations, and then some.
Since people are living longer, retirements are lasting longer, which may require some adjustments. For instance, you should be cautious with spending in your early years of retirement so that your resources last longer. Another idea is to be more aggressive with investing, or even head back into the workforce with a part-time job. You may also wish to consider purchasing long-term care insurance to cover the high cost of late-life health problems. No matter what decisions you make, be sure to do so in such a way that you can enjoy every minute of your retirement.