With medical advancements, better health care, and improved standards of living come increased longevity. Since 1990, the number of centenarians (those living to be 100 and older) has quadrupled. Out of every 10,000 adults, there are 7.4 centenarians alive today, and that number is expected to increase to 23.6 in the year 2050.
Living longer means spending more time with loved ones, taking part in recreational activities, and enjoying more life experiences. However, it can also mean a longer career, the need for a longer-term financial strategy, and adjusting to societal changes. Therefore, the big question is if we’re likely to add more years to our life, can we also add more life to our years?
Who is living to 100?
On average, people born in 1947 will live until age 85. According to research from the World Economic Forum, life expectancy has been increasing one year every five years. Those born in 1967 have an average life expectancy of 91. Those born in 1987 have an average life expectancy of 97, and those born in 2007 have a life expectancy of 103.
Interested in your personalized number? Enter your information into the online Actuaries Longevity Illustrator; it takes into account your age, gender, health, and whether you smoke to create a personal longevity estimate. This information can help you create a more accurate retirement strategy.
Implications of living longerLiving longer is generally great news, but as a result, working longer and saving more for retirement aretwo important considerations to keep in mind.
“The expectation that retirement will start early- to mid-60s is likely to be a thing of the past, or a privilege of the very wealthy,” according to the World Economic Forum.
The organization also predicts that policy makers and society will need to:
- Review and increase the national retirement age.
- Adapt to an older, working demographic in labor markets.
- Expect longer career paths.
- Create a “safety net” pension for all.
- Create easier access to well-managed, cost-effective retirement plans.
- Provide more financial literacy programs starting in schools and targeting vulnerable groups.
- Support initiatives to increase retirement contribution rates.
- Encourage employers to automatically enroll new employees into a retirement savings account at a default contribution rate.
Prepare now to enjoy life later
The concept of living longer is cause for celebration – but preparation is key as well. Here are four things to consider:
1.Talk to your financial professional.
He or she will know whether you’re heading in the right direction based on your desired retirement age and estimated longevity. Financial professionals understand today’s issues regarding retirement budgeting and life expectancy, can offer guidance on how to maximize your Social Security, whether or not it would be a good idea to consider annuities, and will be able to fully assess your situation and provide personal guidance.
2.Estimate how much you should save through life’s different stages.
While each situation is unique, Kimmie Greene, spokeswoman for Mint.com, provides this guidance on how much you should have saved at every age:
- By age 35: Have twice your annual salary saved.
- By age 40: Have three times your annual salary saved.
- By age 45: Have four times your annual salary saved.
- By age 50: Have five times your annual salary saved.
- By age 55: Have six times your annual salary saved.
- By age 60: Have seven times your annual salary saved.
- By age 65: Have eight times your annual salary saved.
3. Have a realistic understanding about how much you will spend in the future, and budget accordingly.
“The average American retiree (or those 65 and older) is spending about $3,700 per month -- or about $44,600 per year,” according to The Motley Fool.
That means if you’re expected to live to the age of 90 and plan on retiring at 65, you’d need $1,115,000 for retirement.
If you want a more accurate number, budget all of your expenses, including rent, food, Medicare, utilities, and transportation. Line those up with where your retirement money will come from. Will your pension, Social Security, assets, earnings, public assistance, or other sources of income for older adults be able to cover your future expenses?
Also consider life’s ups and downs. You might want to spend more during your early years of retirement because you’ll be healthier and able to physically enjoy more experiences. Then again, you could have an unexpected health issue midway through your retirement years and need a lump sum.
4. Work as long as you can.
“Working longer can be an important related strategy. More years of wage income can help meet living expenses as you wait to claim Social Security,” according to the New York Times.
Take an optimistic viewpoint about working longer. A separate New York Times article reports many older workers also find their health allows them to keep working and working longer can continue to add purpose in life and contribute to their overall happiness.
Things to Consider:
- Talk to a financial professional about your retirement options and planning for the future.
- Use a longevity calculator to estimate your personal longevity.
- Prepare a budget of your expenses and retirement income.
- Be optimistic and realistic about your retirement age.
- Join the conversation on Transamerica’s Wealth + Health Community, and submit your ideas for living wealthy and healthy life.