Perhaps the biggest concern that clients share is whether their accumulated savings will last throughout their retirement years. How do they know if they’ve saved enough, or if they’re spending their nest egg too quickly? One of the key factors in the equation is life expectancy – but how many people know exactly how long they expect to live?
Obviously, this worry could be addressed with extreme accuracy if folks knew the precise age they would live to see. Alas, this is a great unknown. Rather than be too optimistic about their chances, we’ve found that many clients tend to underestimate their lifespan, basing their conclusion on how long their parents or grandparents lived.
But longevity studies are now showing that people are living about 30 years longer than a century ago, so this gauge may be dramatically off base. And life expectancies are poised to accelerate in the next two decades, driven by advances in medical technology. Imagine living 100 years or more – what would that do to your retirement nest egg? Where will you live? How will you get to the grocery store? How will you stay involved in your community or grab coffee with a friend? Do you want to volunteer or work part-time? Are there opportunities for lifelong learning? A very long old age is the new challenge for individuals and families.
It is very likely that, due to increased life spans, today’s retirees will find themselves living for a much longer retirement period than previous generations experienced. Because it’s hard to fund a 30-year retirement on a 40-year career, the increase in lifespan has given rise to a new area of financial planning – longevity planning – that focuses on the concerns such as the need to save a higher percentage of income, transitioning to a second (or third!) career, changes in housing, and providing care in older age. Longevity requires new thinking.
MIT’s Age Lab has some of the best up-to-date information about the study of longevity and aging. If you are interested in learning more, visit their website at agelab.mit.edu. You can also volunteer to get involved in some of their ongoing research projects or outreach programs.
Talk with your planner about your own situation, and to learn more about potential strategies and resources that support a long and secure retirement.