Addressing Longevity Risk
Americans are retiring earlier and living longer, and the gap is growing. I call it the Age Wave. During the last century, our life expectancy has almost doubled. Not only are people living longer, but the proportion of our older population in this country is growing dramatically. Think about this; the over-80 population is growing five times faster than the overall population. By 2030, the demographics of 32 states will resemble those of Florida today.1
Speaking of Florida, I recently visited my favorite Great Aunt Lila and Uncle Marvin who reside at a pleasant assisted living facility near Boca Raton. Upon entering the lobby I was welcomed by Aunt Lila and saw a photo board of the seven centurions who currently reside at their modest sized facility. It was a clear message to me that the demographics are changing. You might not live until 100, but it may be the norm in the future and it is likely that you’ll have many years of living in retirement to finance.
According the National Center for Health Statistics, by the year 2050 about one million Americans will be at least 100 years old. Consider Jeanne Calment who entered the Guinness Book of World Records when she passes away in 1997 at the age of 122. Last year Hallmark Cards Inc. sold 85,000 birthday cards that celebrate one’s 100th birthday.
When I recently mentioned this statistic to a client he stated with a grin: “This means a majority of the cars on the road will always have their blinker on and everyone will eat dinner at 4pm.”
Longevity means planning for retirement will take on more importance than ever before as more years of retirement need to be financed. According to the Congressional Budget Office, only half of baby boomers will have enough to maintain their standard of living throughout retirement. It’s not luck that enables people to retire younger, travel and enjoy themselves. It’s planning. Relying on Social Security or a company pension used to be enough, but today your own retirement savings have become an increasingly important factor in how comfortable you will be in retirement.
Will you and millions of baby boomers have enough to live on through their long life expectancies? According to Smart Money, the average length of retirement increased from eight years in 1950 to over 20 years in 2012. Americans are retiring younger and living longer. Today’s advancements in medicine, technology and personal health are allowing retirees to live longer. A solid retirement plan should provide a lifetime income stream that not only accounts for traditional life expectancy, but beyond. Lifetime income components are necessary in order to ensure retirees’ assets stand the test of longevity. Given these facts, a critical component of the retirement planning focus needs to address the probability of survivability. It is imperative to know whether your income is going to outlive you or are you going to outlive your income.
But here is the good news of the demographics; greying now means playing! Rocking chairs aren’t for today’s grandparents-especially here in Central Oregon. Retirement will more than likely involve more planes, trains and automobiles as well as skis, stand up paddle boards and golf clubs. Enjoy your journey but please don’t overlook the importance of planning.
David is President of the Rosell Wealth Management in Bend. He is the Past President of the City Club of Central Oregon and a Past Chairman of the Bend Chamber of Commerce. David can be reached at (541)385-8831. Check out his latest financial videos: www.RosellWealthManagement.com.
1Jackson National.
Investment advisory services offered through Rosell Wealth Management, a State Registered Investment Advisor. Securities offered through ValMark Securities, Inc. Member FINRA, SIPC 130 Springside Drive, Ste 300 Akron, Ohio 44333-2431. 800 765-5201. Rosell Wealth Management is a separate entity from ValMark Securities.
