Longer Life Expectancy Means a New Plan

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People are living longer nowadays. According to the Centers for Disease Control and Prevention (CDC), the average life expectancy at birth is 76.5 years for males, 81.4 years for females, and 79 years for both sexes. With medical advances more people are living into their late 80s and 90s than ever before.

This is significant as a longer life means more years in retirement. That means your savings have to last longer. Some people face shorter retirements due to health issues, while others may need their money to last far longer. Planning for your retirement is about being prepared for however long you live.

In past decades, retirement planning had a fairly standard formula: work for 40 years, retire, and expect 15 to 20 years of post-work life. That model made sense when pensions were common and people didn’t routinely live decades past retirement. Times are different now.

Today, many retirees are looking at upwards of 30 years of retirement. With that kind of timeline, small risks turn into big ones. Inflation has become a major concern. Health care costs tend to rise with age, as does the need for more doctor visits and medication. When living on a fixed income during your retirement years, these factors can make a huge difference in your quality of life.

How to Adjust Your Retirement Planning:

• Don’t Focus on an Age-Plan for a Range: Instead of planning to the average life expectancy age of 79, many planners now suggest building plans that can last into your age 90s.
• Reconsideration Withdrawal Rules: The 4% rule is a commonly used retirement strategy where you withdraw 4% of your savings during your first year of retirement, then increasing that amount each following year to keep pace with inflation. While this is a solid plan for many investors, flexibility is key. Adjusting spending based on markets, health, and real-life needs can make a plan far more durable.
• Postpone Social Security: Delaying Social Security can significantly boost your monthly income. Each year you delay claiming past full retirement age, up to age 70, increases your monthly benefit for life.
• Create Income Layers: Resilient retirement plans don’t rely on a single source of income. Social Security, pensions, investment income, part-time work, and annuities can work together to diversify income sources and provide stability.

Contact your retirement planner and consider revisiting investment mix and health care planning from time to time. Small changes can make a meaningful difference in how long your retirement nest egg can last. Living longer in your retirement years should be a gift, not a financial burden. Contact us to review your current estate plan and discuss ways to improve your retirement planning.