For Mark Roberts’ Use: In the retirement planning world, we see that many people tend to focus on how much money they need to save for retirement. While that is certainly one way to look at it, we often find it helpful to also ask, how long will I need income in retirement? After all, it could be difficult to decide upon some arbitrary sum of money that you need to save, if you don’t have any idea how that savings will translate into annual income.
Asking yourself this question involves a bit of guesswork. You will need to estimate how long you might live after retirement, which of course is impossible to do with absolute accuracy. However, there are ways in which you can arrive at a reasonable answer to this question.
During the past century, we have seen the average life expectancy increase from around 50 years old (in 1900) to age 85 or so today. In fact, the average 65-year-old retiree today can expect to continue living twenty or more years. We have better nutrition, healthcare, and medical technologies to thank for this change, and that trend will likely continue for future generations.
You might think that a longer life means a delayed retirement, but it appears that we’re trending in the opposite direction! The average age of retirement was 68 in 1950, but it is dropped to 62 today. When you consider that fact, combined with the potential for a much longer life, it’s easy to see how some people spend a full quarter of their lives in retirement!
We’re all happy about the likelihood of a longer lifespan, of course, but it does necessitate some changes in how we approach retirement planning. In 1900 people have worked until the day they died, but today we can expect a long period of retirement! If you’re lucky, you might spend twenty or more years on travel and leisure once your career has ended. But of course, that will only be possible if you plan very carefully for a retirement income plan that lasts the rest of your life.
It’s no wonder that many of you are worried about outliving your money. And that’s why we recommend a shift from thinking “How much money do I need?” to “How long will I need income?”. Schedule an appointment with us, and we can review your retirement goals with you. Then we can help you to decide upon a retirement budget, estimate how long you will need that income, and show you ways to set up a stable stream of income to last throughout your retirement.