When we think about retirement, our natural tendency is to look at those folks who we know who are already retired. Typically, the people closest to us in retirement are our parents or even grandparents. There is a distinct danger in viewing our own retirement through this lens. It is very likely that your retirement will look very little like your parents’ retirement. Certainly, it will look different than your grandparents’.
Longevity is a retirement risk that far fewer retirees had to worry about in years past. Only a few decades ago, people retired at 65 and may have died a few years later. Age 80 was considered old in those days. There is a big misconception among people today that retirement will statistically last about 11 years since many people retire at 65 and “life expectancy” is 76 for men in the U.S. The truth is that 76 is the life expectancy of someone who is born today, not someone who has already attained age 65. Life expectancy for a 65-year-old male in the U.S. today is around age 84. This is nearly twice as long as many people think, resulting in retirees to be unprepared for the costs of a modern retirement.
Living longer in retirement sounds great on the surface. The reality is that many of those living longer aren’t living well longer. Modern medicine is increasing their life, but not in a way many would hope for. This makes the impact on their retirement even more costly. We are living longer, which requires more money, and we are also incurring more medical expenses in doing so.
Retirement readiness requires us to start managing our expectations about what the future might look like, as well as what it might cost. Gathering data around average medical costs, long-term care costs, and normal retirement lifestyle needs is crucial for those entering retirement so that they have a clear picture of what to potentially expect in their later years.
For women, the problem is even worse. On average, a woman will have a retirement that lasts over two full years longer than men. This translates to an average retirement of over 20 years. For some, the problem can be compounded due to the loss of a spouse, one of their Social Security checks, or possibly a pension. It is imperative for women to plan for the unique challenges they face entering retirement.
Retirement for those ages 50-65 will likely look very different than it did for those before them. Planning not just for all the potential costs, but also the logistics including where to live, future care support including long-term care, access to medical care, and social networks are important factors in an enjoyable retirement. The better the plan, the better the chances for success.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.
Eric is President and founder of Reich Asset Management, LLC. He relies on his 25 years of experience to help clients have an enjoyable retirement. He is a Certified Financial Planner™ and Certified Investment Management AnalystSM (CIMA®) and has earned his Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) designations.
