According to the Social Security Administration, a 65-year-old can expect to live another 19 to 21.5 years, on average. And interestingly, the government agency also says a third of 65-year-olds will hit age 90, and 1 in 7 will live beyond age 95!1 If you are in relatively good health that means upon retiring at 65 you have between 20-30 years to look forward to…that’s if you planned well for your retirement.
The Bureau of Labor Statistics estimates growth in the senior workforce will outpace that of younger employees. While job growth in the labor market for 35- to 44-year-olds is expected to rise 13.9% from 2018 to 2028, according to BLS, it will rise 50.8% for those 65 to 74 and 104.9% for those age 75 and older.2 These are very striking statistics to consider! Rather than quit the workforce at age 65, many Americans continue to work either to supplement their retirement income or because they miss the routine of the workplace.
Planning For Your Retirement
There are three phases to consider when planning your retirement. When you begin your journey in your early 30s, and continue to save and invest in your 40s and 50s, deciding how and when to retire in your 60s and beyond, and finally retiring – meaning you are no longer working for a living. So how does one prepare in a way that allows you to enjoy the lifestyle you want for 20-30 years after leaving employment or a career.
1. Pre-Retirement Planning and Accumulation of Assets
It is never too early to begin saving and as soon as you are able to start putting some money away for your future, you should consider speaking to a financial advisor who can help you create the best possible program for your situation. Depending on whether you have college and/or grad school debt, or are working in a career or job that offers an investment plan such as a 401K, you should decide exactly how much you can afford to save every month.
Starting your investing and saving as early as possible gives you the advantage of a valuable commodity that older people don’t have – that is time. Although during your early years it may be difficult to save due to student debt, a new home, raising a family, and entry-level salaries, we suggest trying to find a way to save something – even if it’s just a small token – so you get into the habit of setting aside some money towards your retirement every month. This should continue and increase throughout your working years into your 40s, 50s, and even into your 60s.
2. Early Retirement Years
These are the years when you have finally made the decision to fully retire – perhaps in your early to mid-60s and have started living off of your social security, pension, savings, and/or investments. It’s at this time that many people decide to purchase a vacation home of their dreams, move to a new area of the country, travel extensively, begin a second career or business, or do volunteer work. These are the years that you usually have relatively good health and close family relationships and want to take advantage of this new free time you have earned.
At this time in your life, it’s important to speak with a qualified financial advisor to review your financial “portfolio” and help make some decisions about how to maintain your cash flow so that it can hopefully last throughout the rest of your life.
Keep in mind that many retirees today – due to inflation, a late start in investing, market volatility, etc. – are fearful that their nest egg will not last. So in your early retirement years, you may need to make some adjustments to your lifestyle in order to maintain your standard of living.
3. Mid-Late Retirement Years
Once you are into your mid-70s and beyond you should be having a talk with your adult children or other family members explaining to them what is most important to you and your spouse should your health decline. If you have a substantial estate, this is a good time to review your will, estate plans, etc., with your financial advisor, estate attorney, and CPA. Nothing is more frustrating than experiencing an unexpected illness or setback when you have not planned for how you want your assets and personal effects to be distributed.
This may also be the time in your life when you and your spouse decide it’s best to move into a retirement community, downsize to a smaller residence that will be easier to manage, or move closer to your children or other family members.
Are You Prepared for Retirement?
If you are 60 or older, are you fully prepared for this time in your life? I find that although people are working with various experts, including an attorney, CPA, wealth advisor, etc., they are missing an Advisor as part of their team. There are often huge coordination gaps between all of the experts which can adversely affect your financial picture. When I begin a relationship with a client, I frequently uncover various opportunities that can help people increase their savings. Next month we’ll discuss why this missing Advisor is such an important person to have on your “team”.
With so many people living longer and fuller lives, you want to be sure that you have prepared for a full and rich retirement experience. Although you or your spouse may face some new challenges along the way, with well thought out plans and preparation, a healthy and active lifestyle, and a support system of friends, family, and an advisor that you can count on, retirement can be an exciting and happy time of your life.
Lincoln Financial Advisors does not provide legal or tax advice. Saul Simon is a registered representative of Lincoln Financial Advisors, a broker/dealer (Member SIPC) and registered investment advisor. Simon Financial Group is a marketing name for registered representatives of Lincoln Financial Advisors.
Simon Financial Group
1 https://www.ssa.gov/policy/docs/ssb/v81n3/v81n3p19.html – Changing Longevity, Social Security Retirement Benefits, and Potential Adjustments
2 https://bit.ly/3msBokd U S Bureau of Labor Statistics - TED: The Economics Daily