By today’s standards, being a centenarian is hardly newsworthy. Life expectancy in the U.S. is increasing every decade: Americans now have a one in four chance of living to age 97. And for the generation born today, researchers in the budding field of geroscience — aimed at understanding the relationship between aging and age-related diseases — predict that living to age 120 may become the norm.
But what does it mean for you — and your chances of enjoying a comfortable retirement? Research on the topic of longevity provides valuable insight on the realities of today’s retirement landscape, and how today’s savers can help prepare for a longer financial future.
[See: 6 Strategies To Avoid Working in Retirement.]
A generation ago, the American life cycle looked dramatically different. Breadwinners worked at a job for 30 or 40 years while building a family — and hopefully some wealth — before retiring in their 60s and spending 15 years or so in retirement before passing away. Many people enjoyed a healthy income during their retirement from guaranteed pensions, and were cared for by family members in their final years of life.
Today, Americans face a radically different landscape. Retirement savers face living longer, the uncertainty of Social Security, and fewer have access to traditional pensions. We won’t just live longer but will be spending more years in our retirement — with many of us retiring between the age of 60 and 70, and lifespans lasting into the 90s and beyond. As a result, many of today’s savers will rely on 401(k) accounts, bond yields and an unpredictable equity market to help get them to and through retirement. Add to this the fact that while we are living longer, we can also expect to encounter new health care needs and their associated mounting costs.
While facing these challenges, it’s no wonder that nearly half of all consumers thought it was likely they could run out of money in retirement, according to recently released research on longevity from Lincoln Financial Group. Fortunately, you can take steps to adjust your mindset and increase your chances of living comfortably through your 100th birthday. Here are three important financial strategies to consider:
Focus on your income in retirement. The impact of the market’s ups and downs, inflation, and taxes become magnified over retirements that last 30 years or more. Today, strategies like the 4 percent withdrawal rule for sustainable retirement income may not work in the face of low interest rates and equity markets that could be poised for a correction. Investors may need to take on too much risk through investments to generate the income they want.
To safeguard savings and ensure you receive a steady stream of income in retirement, consider protecting assets from longevity risks with solutions that help provide guaranteed lifetime income. Guaranteed lifetime income solutions are vital for helping consumers achieve their retirement objectives, and annuities are uniquely positioned to deliver that income. Some annuity solutions also provide savers with cost of living increases and tax efficiency. The income an annuity offers can help offset the loss of pensions that previous generations enjoyed, providing savers with a predictable stream of income in retirement that can’t be found in any other investment product.
[Read: How to Invest in Retirement.]
Take advantage of retirement savings plans. While younger savers may not focus on long-term planning due to more immediate savings needs and priorities, it’s never too early to start saving. Savers just entering the work force can take advantage of tools available to them like a 401(k), and start saving at least to the company match. The power of compounding is on your side. Making small contributions today can help lead to big savings tomorrow. And if you’re not saving to the match, or participating in your workplace retirement plan, you’re leaving money on the table.
Don’t do it yourself — seek guidance from a pro. If this new view of a prolonged retirement makes you feel overwhelmed, remember that you don’t have to face it alone. A financial professional can help you create a plan designed to meet your retirement goals and help you manage the risks of a longer retirement. According to research from Lincoln Financial Group, consumers who work with an advisor are significantly more likely to say they feel confident that their wealth is protected from risks such as long-term health care costs, inflation, market volatility, and longevity than consumers without advisors. While some investors are confident enough to go it alone, savers who work with an advisor tend to be more informed about the solutions in the marketplace that can help protect savings and wealth over the entire course of your life. Advisors can provide valuable input on the products that can help protect your wealth for the long haul.
[See: 9 Stocks to Buy for the Aging Baby Boomer Market.]
People have spent thousands of years searching for the secret to immortality. While we’re not quite there yet, today’s longer lives are still a reason to celebrate. Take the time to plan ahead and put the financial solutions in place that will allow you to enjoy your lifestyle in retirement — and celebrate your 100th birthday in style.
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3 Retirement Savings Strategies for Future Centenarians originally appeared on usnews.com
