Are You Prepared for a 30 Year Retirement?

The good news? Retirees are living longer. The bad news? Many aren’t planning for it financially.

Life expectancy is a key piece of retirement planning. After all, you’ll need to estimate your lifespan to determine how much money you’ll need to retire comfortably. Many pre-retirees speculate on this figure or overlook it entirely.

So, how long will you live? While no one has a crystal ball, the Social Security Administration provides an Actuarial Life Table that estimates the average man living to 65 will make it to 82, while the average woman will make it to 85[1]. That’s not quite 30 years, but this isn’t an area where you want to estimate low.

Given the reality of increased longevity, retirement planning strategies must adapt. Here are some key considerations to help ensure financial stability throughout your golden years.

Saving Early

It’s crucial to start saving for retirement as early as possible, even more so than previous generations. With the help of a financial advisor, create a plan that accounts for inflation and possible medical expenses that may come with old age. Beware of simple “rules of thumb” when it comes to retirement savings and get a professional opinion.

Delaying Social Security 

If you anticipate a longer life expectancy, it’s worth considering postponing your Social Security benefit. For every year you delay collecting beyond your full retirement age your monthly payouts rise by 8%, up to age 70.[2] After that, there’s no further increase. You can gauge your monthly benefit for different ages using your real income records.[3]

Making Catch-up Contributions 

As you get closer to retirement, consider catch-up contributions. These allow older savers to add extra amounts to tax-advantaged retirement accounts without surpassing IRS limits. In essence, it’s an opportunity to invest more now to ensure a larger fund during retirement.

Delaying Retirement 

Naturally, postponing retirement is one way to account for a longer life span. Pushing back a few years could make all the difference. This may give you an opportunity to add additional contributions, avoid withdrawals, and to grant your funds more time for potential growth.

Phasing Into Retirement 

Some individuals may choose to transition into part-time work rather than fully retiring, to supplement income and stay active. For instance, a music enthusiast might take up a position at a local record store or offer lessons to budding musicians. Or perhaps your career enables a phasing out approach, working fewer days or hours on your way to full retirement.

Planning for Healthcare Needs

Longer life often comes with increased healthcare needs. Therefore, planning for long-term care and medical expenses, including possible insurance policies, is a vital component of longevity planning.

Adjusting Your Investment Strategy 

Commonly, asset allocation as you near retirement involves a shift from more risky to more conservative investments. However, with the possibility of living 30 or more years into retirement, maintaining some level of growth-oriented investments may be necessary to ensure that savings can keep up with the costs of living and healthcare.

Are there other factors to consider when it comes to longevity? Absolutely. But hopefully this list gets you thinking about the importance of proper planning. Longevity is a gift that presents both opportunities and challenges. By recognizing the implications of increased life expectancy on retirement and proactively planning for longevity, retirees can ensure they are well-prepared to enjoy their golden years without the burden of financial stress.

[1] “Actuarial Life Table.” Social Security Administration, 12 Apr. 2022, www.ssa.gov/oact/STATS/table4c6.html. Accessed 9 Aug. 2023.

[2] Carlson, Bob. “Here’s More Evidence In Favor Of Delaying Social Security Benefits.” Forbes, 24 Feb. 2023, www.forbes.com/sites/bobcarlson/2023/02/24/heres-more-evidence-in-favor-of-delaying-social-security-benefits/?sh=3fcf61166e96. Accessed 9 Aug. 2023.

[3] “Longevity Risk: Could You Outlive Your Savings?” Charles Schwab, 9 Jun. 2023, www.schwab.com/learn/story/longevity-risk-could-you-outlive-your-savings. Accessed 9 Aug. 2023.