As a financial advisor, I work with clients to build their portfolios in order to achieve their life goals. Over the last ten years, I have noticed a shift in thinking about retirement age among my clients. After being stung by the stock market crash following 9/11/01 and the global financial meltdown of 2008, age 65 is no longer the goal age to retire. Many don’t feel they have accumulated enough retirement assets to sustain them during retirement. If this describes you, your concerns are well-substantiated.

Photo Courtesy @Shutterstock.com/ Andrey_Popov

Let’s look at Social Security (SS) as one source of retirement income. President Franklin Delano Roosevelt created the SS program during the Great Depression when the average life expectancy in the United States was 62 years. The government designed SS retirement benefits to kick in at age 65, leading to 65 as the common goal date to retire. Since 62 was the average life expectancy, the government was not expecting recipients of SS to live much longer! Our Congress wanted to ease the suffering of millions of senior adults during a time of crisis, but it was never intended to become a replacement for retirement savings.¹

Now, let’s look at your retirement savings as a second source of income. Current statistics show that there’s a 50% chance that among married couples, at least one spouse will live to be 92 and a 25% chance that one will live to be 97. Medical reports are showing that we are closing in on a life expectancy of 100. We are living longer lives with the help of medical advances and technology. Fifty years ago, the average retirement was twelve years. Now when someone retires at age 65, the average retirement is twenty years. And we know that many will live longer and have 30 years of retirement. Here’s our reality:

“It is not realistic to finance a 30-year retirement with 30 years of work. You can’t expect to put 10% of your income aside and then finance a retirement that’s just as long.”  -John Shoven, Stanford University Professor of Economics

I see some clients frustrated and distressed that they have to work longer to accumulate more assets. In fact, Mass Mutual supports their distress. They conducted a recent survey among baby boomers and learned that their number one fear is outliving their savings. Instead of feeling frustrated, I want to suggest that working longer is a new reality for many investors. Doesn’t it make sense that if we’re living longer, our time in the workforce will be longer?

Fortunately, not everyone will have to work longer just because they are living longer. Those of you who started saving in your twenties will enjoy the compounding that results when investment time has been on your side. Those who waited until their late thirties and forties to start saving will feel like they’re playing catch up. If you are in the latter group, let me encourage you.

It is never too late to make adjustments to better prepare for your retirement. Here are some basics of financial planning to consider:

• Get rid of your debt! Start small if you must. What is the lowest balance of debt you face? For many of us, it’s a credit card bill that escalates from one month to the next. Could you pay that off this month or over the next two months? Perhaps you could find a few extra dollars in your budget and make extra principal payments to shorten the time you’re in debt.
• The corollary is don’t add new debt! Adopt the rule that if something is worth having, then it’s worth saving for.
• Ideally, you want to target 15% of your income toward retirement savings. If that feels overwhelming, start with 5% and gradually build up to it.   

Are you willing to accept that most of us will be working longer because we are living longer? I would love to hear your thoughts on this subject. You can click the “Share Your Comments” link below.

Blessings,

Lee Ann

¹ Robbins, Tony. Money: Master the Game, p. 31.