There's an important new buzzword when it comes to estimating how much money you'll need for retirement: longevity. It refers to the expected life span of the average American...and it's getting longer. This is great news for Baby Boomers who feel as active at 70 as they did at 50. It's troubling news for the financial analysts, actuaries, and underwriters who are watching Social Security dwindle and wondering how to advise people on funding their retirement.
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Get a Free QuoteAmericans Are Living Longer
According to the CDC, current American life expectancy is 76.1 years.* That's a big difference from the life expectancy in the 1930s, when the Social Security program was established. In the year 1930, life expectancy was about 58 for men and 62 for women.
This means that people are living longer, but they're not always paying into Social Security for longer. The retirement age in 1930 was 65, and many people still retire at that age today. This means more people need to pull more money out of the system for longer periods of time. Where is all that money going to come from?
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Get a Free QuoteLonger Life = More Retirement Money Needed
Okay, so now you know that you'll probably live longer than your grandparents. Financial experts will tell you that the best way to prepare for a long retirement is to supplement Social Security yourself. First, you need to estimate how long you expect to live. According to research performed by Bankers Life, more than 87% of middle-class Americans age 55 and older expect to live to the age of 86. You also need to take your personal family history into consideration. Are your relatives long-lived? Do you have parents, grandparents, or great-grandparents who lived to be 100?
Once you have an estimate of how long you think you'll live, now it's time to estimate your financial needs per year. Multiply those two together, and you'll have a ballpark estimate for total retirement needs that we can talk about together. I'll help you look up how much you're likely to receive from Social Security and any pensions you may have. If these income streams don't cover your expected expenses, your savings and investments will need to make up the difference.
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Get a Free QuoteAnnuities Take the Guesswork out of Saving
Annuities are perfect for those who worry about outliving their retirement funds. Why? Because they pay you money every month for the rest of your life, no matter how long that life may be. The top two fears that come along with living longer are bad health and outliving your savings. Some people think they'll just work past retirement age and continue earning income. But what if your health prevents you from doing this? If you're not healthy, you can't work...and if you can't earn money, what will you fall back on? This is the exact problem an annuity was designed to solve.
You can buy a deferred annuity while you're still working and pay into it every month. Then, when you retire, it pays you. Alternatively, you can buy an immediate annuity with a lump sum of cash and it will begin paying you right away. What's the upshot? No budgeting worries and no fears about outliving your current retirement fund.
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Get a Free Quote"Life Expectancy in the U.S. Dropped for the Second Year in a Row in 2021," CDC.gov, accessed 11/1/23
