4 Facts To Understand So You Don’t Outlive Your Savings

Retirement today lasts longer than ever before. For many people, that can be both a good and a bad thing. (Photo: Gustavo Fring/Pexels)

Retirement today is a whole new ballgame, and it might run a few extra innings.

That may not be the best sports analogy, but it’s one of the main takeaways from an online conversation sponsored by Barron’s with gerontologist and aging expert Ken Dychtwald, CEO and founder of Age Wave. Dychtwald is a prolific writer and researcher on the new reality of aging in America.

What makes retirement today so challenging? The main factor is increasing longevity.

Coupled with pervasively low interest rates and high asset prices, it means that, as your financial advisor, we must pay a lot more attention to making sure you don’t outlive your savings.

Here are 4 key facts you need to understand to master the new reality of retirement:

Fact #1. An increasing number of people may live to 100. “Medical advances and healthier lifestyles among affluent Americans mean that many clients are likely to live to 100 or longer,” summarized Barron’s. As financial advisors, we routinely plan on clients living – and spending their money – to age 95. That may no longer be enough. Contrast that with the retirement reality that prevailed in 1960, when John Kennedy was elected to the presidency. The average man lived to age 67. You retired, and then you died. “Retirement” didn’t cost as much as it does today.

Fact #2. Women are likely to outlive their partner. That means they need more money than men to last all the way to the end, and they will likely be managing their finances alone at some point. Women who are not accustomed to handling the financial and investment decisions on their own will want to call on the services of a trusted and knowledgeable financial advisor who can relate to their concerns and take the time to explain things in terms they understand.

Fact #3. Your health may not last as long as your life does. It’s an unfortunate side effect of living longer. You may live a great many years, says Dychtwald, but in declining health, and with increasing health costs. We can’t control what’s in our genes (at least, not yet!) but we can try to maintain a healthy lifestyle, protect ourselves against long term care expenses, and put the proper estate planning documents in place. The good news? Clients under the age of 40 may never experience traditional nursing home care, says Dychtwald, due to ever-accelerating healthcare advances.

Fact #4. More people will need financial and caregiving help. It’s much more likely than ever that we will need to help our parents or even our children with their finances or day-to-day living arrangements. The COVID-19 pandemic has shown the precarious nature of our safety net. It does not take much for people to lose their ability to work, care for their children, or carry out simple tasks like getting to the grocery store or doctor’s office. As we age, we will need more assistance and support to care for ourselves. In turn, we may find we need to lend a helping hand to children or grandchildren who struggle to keep up financially. Being closer to family and friends, and being part of a community, may take on a heightened importance in tomorrow’s retirement.

The Takeaway: Dychtwald’s final tip on how to master the new retirement reality? Work to maintain brain health as you age, he advises. “Maybe as much as 65% of cognitive loss is preventable with proper sleep, healthy diet, exercise, and maintaining the right body weight,” he says. “All of us should take our brain health more seriously and do everything possible to keep ourselves functioning and useful.”

About Mari Adam

Mari Adam, Certified Financial Planner™ has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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