Retirement Planning: Living A Long Time

You’ve worked hard and are looking forward to a relaxing, leisurely retirement. But it’s easy to wonder how long your money will need to last. We’re definitely living longer thanks to advances in healthcare and healthier lifestyle choices, so the need to sustain your lifestyle over a long time period is very real.

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Living a Long Time

You’ve worked hard and are looking forward to a relaxing, leisurely retirement. But it’s easy to wonder how long your money will need to last. We’re definitely living longer thanks to advances in healthcare and healthier lifestyle choices, so the need to sustain your lifestyle over a long time period is very real.

Please click on the links to learn more about:

How Long Will You Live?
How Living Longer Affects Your Retirement
Your Income Stability Ratio
Structuring Your Investments to Last

Have a question about Living a Long Time? Contact us now.

How Long Will You Live?

Statistically, you’ll have plenty of time to enjoy retirement according to the Society of Actuaries1. 65-year-old life expectancies are increasing. For example,

Male: A 65-year-old man has a 41% chance of living to age 85 and a 20% chance of living to age 90.
Female: A 65-year-old woman has a 53% chance of living to age 85 and a 32% chance of living to age 90.
Couple: Married couples live even longer. There’s a 72% chance that one of them will live to age 85 and a 45% chance that one will live to age 90. There’s even an 18% chance that one of them will live to age 95.

Now add the fact that higher income households have longer life expectancies. At age 40, the richest 1 percent of men can expect to live 15 years longer than the poorest 1 percent, and the richest 1 percent of women can expect to live 10 years longer2. Advances in medicine and our access to it, as well as health style choices and genetics all play a factor in increasing life expectancies. You easily have a 30 year retirement to plan for!

How Living Longer Affects Your Retirement

In retirement planning, making sure you have enough money for as long as you live is of utmost importance. We think of longevity risk, or the unknown length of time you’ll live, as a “risk multiplier”. The longer you live, the more chances you’ll experience rising taxes, rising inflation, costly health events, and multiple market corrections. As of 2019, it’s been more than 10 years since we’ve experienced a recession3, which is unusual. According to the National Bureau of Economic Research, in the period from 1945 – 2009, the US experienced 11 recessions during that 64-year period4. Applying those statistics to your future 30-year retirement suggests that your investment portfolio would need to weather 4 to 6 recessions. It has to sustain you through those multiple market downturns, all while you are spending it to maintain your comfortable lifestyle and still not run out of money. Retiring without professional retirement planning Tennessee trusts is not for the faint of heart!

Your parents’ generation used to look to their employers to provide them a lifetime pension, which when combined with Social Security afforded them a long comfortable retirement. And the company continued to pay the surviving spouse too, so those guaranteed lifetime “paychecks” were worth their weight in gold. Today, though the decline of companies offering pensions to their employees has been swift. According to a Towers and Watson survey, between 1998 and 2015, the percentage of employers still offering a traditional pension plan to most newly-hired employees fell from roughly 50 percent to 5 percent. 5 Clearly, we have to find our own solution.

Your Income Stability Ratio

As part of your retirement planning decision making process, it’s important to look at your income stability ratio. That is the percentage of your income coming from guaranteed sources divided by your total income needed. Guaranteed sources would include Social Security, corporate pensions, and do-it-yourself pensions. A general rule of thumb is to have enough guaranteed income to cover your essential expenses like housing, food, transportation and insurance costs. And having a higher level of guaranteed income can also add to your happiness and overall satisfaction in retirement, according to a 2012 Towers Watson report, which found that retirees who received guaranteed income in the form of a traditional check-a-month pension or annuities tended to have higher retirement satisfaction scores than those without such income.

Structuring Your Investments to Last

Another solution to making your Knoxville, TN social security and your retirement savings last is to structure your investment portfolio into time horizons, investing money you’ll need in the near term more conservatively than money you won’t need until later in retirement. Investing according to “time and purpose” is an important transition from the typical strategy during your saving and accumulating years.

You know that longer life expectancies mean you have more time and are going to face more obstacles in your retirement years: more market corrections, more chance of a debilitating health crisis, and a rising cost of living – both inflationary and taxwise. And you also know that these risks don’t happen in isolation. It’s entirely possible for the stock market to have a losing streak at the same time your spouse gets very sick and Congress raises tax rates.

All of these factors, and more, are taken into account as we guide you through the retirement planning decisions that need to be made. Weighing pro’s and con’s and helping you arrive at what’s right for you and your family is our goal. And we know that outliving your money is not an option.

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