Thanks to modern medicine, and an overall increased quality of life, people are living longer and longer. Indeed, the current life expectancy for someone in the United States is 81 years for women and 76 years for men (thats from birth).
Thats quite an increase from 1950, when the average life expectancy at birth was 68.2. Weve even seen increases since 1980, when average life expectance was 73.7. And, of course, if you live to 65 or 75, the chances that you will live to reach 80 years old and beyond goes up.
While its nice to think that you could live into your 90s fairly easily, the reality is that longevity brings with it some other issues, especially when it comes to retirement planning.
The average person must now plan for a retirement that could last 20 to 30 years, says Rich Winer, retirement planning expert and president of Winer Wealth Management.
Back in 1950, if you retired between the ages of 60 and 65, you only had to rely on retirement income for a few years. Now, you need to plan for decades. And if you are interested in early retirement, at age 40, you could be looking at 40 years or more of retirement.
From needing to cover your daily expenses on a long-term basis, to dealing with the realities that come with failing health as you get older (and linger on in ill health), its vital that you put together a plan that can address the issues that are cropping up as a result of increased longevity.
Establish a plan to accumulate what you need for retirement, Winer suggests. This involves considering how much you currently have saved for retirement, how much you will need to save, and investing on a regular basis to meet your retirement goals.
Its important to consider what rate of return is required in order to reach your retirement needs. Bob Richards, a retired financial advisor and CPA, and the publisher of a retirement blog, points out that when planning for a long retirement its vital that you consider equities as well. Longevity means that more of a retirement portfolio must be equity investments that tend to appreciate over time, and also supply an increasing income over time, he says. If one were to simply buy some fixed income investments such as CDs and bonds, they will never keep up through a long retirement.
On top of planned wealth accumulation and judicious investing, Winer also recommends long-term care insurance. As health care costs continue to rise, they will become the biggest threat to peoples retirement security, he points out. Those without long-term care insurance run the risk of depleting their retirement savings to meet their medical costs.
As you plan your retirement, dont forget to think about the consequences of a decades-long retirement. Building up income streams, and protecting yourself with the right insurance policies, can go a long way toward making sure that your dream retirement doesnt turn into a nightmare the longer you live.
by Ethan Leak