Becoming a first-time grandfather makes one acutely aware of the number of years left on this planet. Suddenly, you find yourself counting the years, measuring your worth through the impact you have on others, and cherishing your moments instead of your money. Retirement is a sobering reality. One that raises a number of big question marks.
Will I have enough to retire?
Can I continue my career into later stages of life?
How many years will I have in retirement?
What financial challenges will I need to anticipate?
From new research in biotech to the emergence of several companies dedicated to human longevity, we’re now contemplating the consequences of an extended human life span. Before rolling your eyes at the distant possibility of living to 120, consider the amount of money, resources, and institutions dedicated to this endeavor. Influencers like Dr. Joon Yun launched the $1 million Palo Alto Longevity Prize in 2013 to encourage scientists to “hack the code of life.” Futurists Craig Venter and Peter Diamandis founded Human Longevity Inc., an organization set on forming a database of one million human genome sequences by 2020. In September 2013 Google announced the creation of Calico (the California Life Company), establishing a mission to reverse engineer the biology that controls lifespan and “devise interventions that enable people to lead longer and healthier lives.”
As of 2015, there were half a million people over the age of 100, a once unfathomable possibility for humans. That number will continue to exponentially grow to 3.7 million centenarians around the globe by 2050, according to Pew Research Center. Not so far from the realm of possibility now, is it? In fact, after attending Singularity University in 2017, I learned that some of the leading futurists in the U.S. predict science and biotech may be able to solve for mortality in as little as 12 years!
While it’s great news that people are living longer with each year that passes – and research sees the gargantuan investments made in the exploration of extending our lifespan – Americans also need to look at what they can do right here, right now to prepare for 30-, 40- or even 50-year retirements. It’s no longer a small phase life.
These advancements in technology and healthcare have also led an entire profession of financial advisors to break new ground, discussing new challenges and uncovering untapped territory with clients looking to retire, no matter their generation. So, whether you’re confident in your ability to generate income for another 20 or another 50 years in retirement, or you’re concerned with how to make your money outlive you, here are four factors to expect in order to make the most of this exciting – and hopefully longest – period in your life.
Expect Market Volatility
Don’t manage your money with emotion. Understand there may be countless market downturns followed by upswings and everything in between. While a sudden market downturn can have a significant impact on investors receiving regular distributions from retirement plans or investment accounts, consider just how close you really are to retirement age. A 58-year-old may soon have the mindset and outlook of a 45-year-old based on the amount of time they plan to be in the workforce to support a longer life span.
Expect Fluctuating Income And Spending Behavior
The appropriate spending strategy for you depends on your personal expenses, desired lifestyle, anticipated lifespan, income sources and life goals. Understanding how to modify your spending when faced with unforeseen expenses or a prolonged downturn in the financial markets— especially in the early stages of your retirement—is essential to preserving your income stream for the long-term.
Fluctuations in the economy, interest rates and the value of the dollar affect the price of the goods and services you use, which in turn has a direct impact on your wallet. Most of us see this impact in the short-term (can I afford a vacation in the next six months) but most can’t grasp the long-term effect of those factors. Even spending—something largely within your control—is impacted by these outside influencers. If you’re not generating enough income to outpace rising taxes, inflation and future healthcare costs, it’s only a matter of time before your expenses may begin to exceed your income.
Expect the Unfailing Certainty of Taxes and Inflation
The longer your time in retirement, the greater the potential that taxes and inflation may erode the purchasing power of your savings and impact your lifestyle. Certainly a trade-off most investors don’t anticipate when mesmerized by the possibility of more years on this planet. Work with your advisor to identify ways to protect your assets from inflation as you move forward in retirement. They say nothing is as certain as death and taxes, but if you expect the inevitability of taxes it just may help you live a longer, stress-reduced life.
Expect Higher Healthcare Costs
Modern advances in medicine and healthcare mean that Americans are not only living longer but enjoying more active and productive lives. Good news for humanity overall. However, coupled with rising healthcare costs (outpacing annual income), longevity represents the single greatest threat to retirement security: outliving your income in retirement. Today’s retirees are expected to live longer than any previous generation. According to the Social Security Administration, a man reaching age 65 today can expect to live, on average, until age 84 and a woman turning age 65 today can expect to live until age 86. But remember, those are just averages. About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95.
All of this doesn’t even take into account the regulation around health insurance, shifting government policy, the increasing occurrence of chronic illnesses, and lifestyle changes. The point is, no matter how much or how little healthcare plays a factor in your current life situation, it is an unavoidable truth to consider when planning your financial future.
While longer lifespans are a good thing, there’s no doubt longevity also points us to the increased need for prudent financial planning. The question is, does your advisor understand the pace of change, the exponential impact of technology year-over-year, and the effect it will have on properly preparing you for a long retirement? Gather your most burning questions, sit down with your advisor, and if they don’t provide clear strategies or straightforward advice that gives you comfort and confidence in achieving your life goals, you aren’t with someone who has your best interests at heart.
Yes, certain elements do play a role in determining our life span, but so much can be done within your control to minimize those that are uncontrollable. Live life by design, not by default. Use this as an opportunity to take control while you still have the opportunity to prepare and anticipate. Because ultimately, you want to look back at the end of life thinking, “I’m glad I did” not “I wish I had.”
Article published by Forbes April 22 2018
Written by Ron Carson