Do these headlines fill you with dread (Oh no, please tell me I won’t still be around at 100!) or excitement (Great! More time to fit everything in!)?
Take a moment to follow this link to a thought-provoking article by Robert Powell, “Planning for Retirement? Plan to live to 100,” posted April 12, 2012 on MarketWatch.
Longevity is now a fact of life, and it’s changing the focus of financial planning. When our firm prepares retirement projections for clients, we routinely plan on clients living to at least age 95 (some of our colleagues actually extend their planning models to age 100, and others, to age 105). Clients invariably remark on these assumptions when we discuss the retirement projections. Some clearly understand the reasoning behind this, while others insist they can’t possibly live that long.
But that’s the point. We just don’t know. That explains why one of the biggest conundrums we face now is how to make sure your money doesn’t run out before you do. Since you don’t know how long you will live, your planning – from the moment of your retirement until the moment of your death – is a very inexact science.
Powell sums it up neatly in his article:
“This, by the way, is no trivial matter. Planning for a retirement that might last 40 years instead of 30 years or 20 years has all sorts of implications, both anticipated and unanticipated. For instance, planning for a retirement that might last 40 years instead of 30 means that you might have to save much more than you thought, or work quite a bit longer than you had planned, or reduce, unexpectedly, your standard of living a good deal more than you ever imagined.”
There are some clever quotes in Powell’s article. Here are some of my favorites:
“We can’t count on dying on time. We need to plan to live to the maximum age of life for the simple reason that we might.” Larry Kotlikoff, Professor of Economics, Boston University
“I have yet to meet anyone whose goal is to have a shorter- than-average life span.” Dan Moisand, CFP, Moisand, Fitzgerald Tamayo
The takeaway? Longevity is the new reality. Your assets need to last as long as you do. There are several things you can do to make sure this happens. If you are ready to tackle the challenge yourself, get started now. Otherwise, get a Certified Financial Planner™ to help you. But don’t put it off another day. Even though you may live to 100, time is not on your side.