You might imagine that there are two types of people, with regard to retirement planning. There are those who set a retirement savings goal years ago, and are steadily working toward meeting it. Then there are people who don’t know how much they need to save for retirement, and they’re not saving enough or not saving at all.
You wouldn’t be wrong about that assumption, since we definitely know people who fit into those two categories. That’s because most people think of retirement in terms of “how much”.
But there’s actually another way to look at this question, and it might even be a better way to look at it. Instead of asking yourself how much you need to save, try asking yourself this question:
“How long will I need my retirement income?”
Have you ever thought about how long you will live on whatever stream of income you establish for yourself in retirement? It’s okay if you haven’t; many people don’t. None of us can answer this question with complete certainty, but it is still something you should try to envision.
That’s because retirement has changed a lot over the past century or so. In 1900, people lived to an average age of 50 years. That means you worked until you died, or close to it. Back then, older or sick people tended to rely upon family in times of need, too.
Now, the average life expectancy is 85 years and increasing. That’s great news, and we owe our longer life spans to better nutrition and medical technology (which continue to improve). But it also means that a person retiring at age 65 could easily live 20 years into retirement – possibly much longer!
Again, there’s no way to know for sure how long you will live. But your family history might offer some clues, as well as your current state of health.
So, what kind of retirement income are you planning to establish for yourself? And do you feel that it will last twenty years or so? What about unexpected (and expensive) changes, like the need for long-term nursing care? Have you considered inflation?
Call us to schedule an appointment, and we’ll evaluate the longevity of your retirement plan. If needed, we can make recommendations for changes that can keep your income secure for a lifetime.
Sources of Statistics:
McKinsey Global Institute. 2008.