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Financial planning for longevity

Happy Elderly CoupleYou’re probably going to live longer than you think. So, you may very well need save more than you expected! The Social Security Administration’s life expectancy calculator estimates that, on average, a 65 year old man today should expect to live until 84; a woman, to age 86.5. Remember, those are just average numbers! As we talked about last month, If you exercise, eat healthily, and manage your weight —- your probability of increasing your life expectancy skyrockets. This makes financial planning for longevity more important now than it ever has been.

In general, people tend to underestimate for how long they may live, or for how much time they will spend in retirement. It’s a challenge for many to recognize that sometimes, we must plan for a retirement that is longer than our actual working career! That makes it necessary to plan to have assets in place to support that lifestyle, or plan to work a bit longer.

Here’s some tips to get you started on planning your retirement for a long, healthy life.

Redefine what “retirement” means when we’re living longer

Investment client longevity is increasing, meaning people are spending longer in retirement. Some people are retired for 30 to 40 years. I don’t know if retirement was originally intended to be this way, but it’s the reality of a longer life. It means that many people have to redefine when — and how — to take retirement.

Older Man WorkingThe financial benefits of working longer/retiring later

One of the best things someone can do in this scenario is to rethink the age they are planning to leave the workforce. Every year you work is one more year of financial confidence, after all. The financial advantages to working later in life don’t stop there. You’ll keep earning income which can reduce or eliminate your need to take from savings. Meaning: you then have more years to add to your retirement. You also can delay collecting Social Security. Every year you postpone taking Social Security, you increase your annual payout by 8%. You heard me right — 8%!

Aside from the financial benefits, working and staying in the workforce in some way — volunteering counts as well — has health benefits. It gives you social interaction and helps keep your mind in the game. Volunteering, specifically, has numerous benefits for your body and mind.

Make a general financial plan that will span the years

After you’ve thought thoroughly about what retirement will mean for you, I recommend you sit down with a financial advisor. They’ll help you navigate complex retirement decisions such as the actual timeframe in which you’ll claim Social Security, or the appropriate rate at which you should take income from your investments or assets. Your long-term relationship with your advisor will also help to fend off elder fraud and financial abuse, as the years go by.

Investing for longevity: the old rules may not apply

The standard rule of “100 minus your age gives you the appropriate stock/bond split for your portfolio” is simply outdated.

For today’s longer retirement, an overly conservative strategy may not grow your assets enough to keep pace with inflation. One example: keeping money that you don’t plan on using for 20 years sitting in a 1.5% annual percentage yield certificate of deposit!

Financial Advisor at Work

Your financial advisor can help you formulate a plan

With all this in mind, the best option for you is to meet with a financial advisor to discuss what your longer life horizon really looks like for you. This includes reviewing your investment allocations, creating an income strategy that will grow with you over the years, and discussing long term health options.

As the years come and go, life happens and things change. Your trusted advisor will help guide you down that path!

November 2019

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. No strategy assures success or protects against loss. Investing involves risk including loss of principal.

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