Let’s Talk About Financial Longevity

Many people today—and more in the future—will face an extended retirement horizon thanks to longer life expectancies. Without careful planning and regular adjustments, you run the risk of underestimating not only the number of years in retirement, but also the associated costs—after all, longevity doesn’t always mean extra healthy years. Couples planning for financial longevity will need to consider a combined timeline based on their individual health and the odds of one outliving the other.

But all is not doom and gloom! You don’t have to live in fear of outliving your savings in retirement. To face those extra years with confidence, read on.

Your longevity estimate

According to a 2018 report from the Social Security Administration, one of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95. The SSA estimates that, on average, a 65-year-old man today can expect to live until age 84.3, and a woman to age 86.6. With those ages in mind, it can be scary to hear that the Society of Actuaries reports 43% of retirees underestimate the life expectancy for someone of their age and gender by at least five years!

The consequences to financial planning around a wrong longevity estimate include working longer and later in life, running out of money and needing to rely heavily on family for support, and/or not being able to leave a legacy for children or grandchildren. You can see why it’s important to estimate your life expectancy as accurately as possible!

It’s true predicting your longevity involves some level of guesswork, but there are things you can do to gain confidence and accuracy in your estimate—in fact, research has found that conscientiousness is strongly associated with longevity!

  • Manage the predictors that are under your control, like eating habits, exercise, smoking habits, alcohol consumption, etc.
  • Keep routine and preventive care appointments with doctors and other health professionals.
  • Check in with a longevity calculator like the Actuaries Longevity Illustrator or Living to 100.

A plan to match that estimate

With an estimate in mind, it’s time to create a flexible financial plan to match. If you don’t already have a financial advisor (preferably a fiduciary), accountant, and attorney, now’s a good time to get these professionals involved in drawing up a financial plan with longevity in mind. They can help you adjust your retirement saving strategy, help adjust your retirement lifestyle expectations, advise you when to claim Social Security and at what rate, and help you avoid elder financial abuse as you approach and enter retirement. As medical science advances, medical and lifestyle costs change, and your health changes, it’s a good idea to do regular financial planning check ins.

Your financial longevity plan should factor in costs like lawn care, housekeeping, other in-home help, repairs to a home (like a new roof or furnace), and transportation services if you live in your home longer, or the cost for extended long-term care. This is in addition to rising medical costs.

When creating your long-term retirement plan, it can help to answer these questions:

  • Where will you live?
  • Where will you travel?
  • What will you drive?
  • How will your hobbies change?
  • Where will you donate your time and money?

Rethinking retirement

If more and more people are finding themselves facing a retirement lasting 30+ years, assuming they begin at the traditional age of 65-ish, perhaps it’s time to rethink or redefine the stages of retirement to fit this longer lifespan. Perhaps you stay in the workforce longer but lessen your hours, embracing a “slowing down” approach to retirement rather than a hard stop. This has many financial, social, and health advantages. However you plan to structure it, make sure you have that goal in mind early on so you can work to achieve it.

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