This Insights article is contributed by Adam McManus, Financial Planning Associate at Pathfinder Wealth Consulting. It is the first post in a two-part series on the impact increased life expectancy can have on your retirement. Part II, published later this month will focus on strategies to lower the risk of longevity.
How old were your grandparents when they died? Your great grandparents?
The further you go back in time, the average life expectancy decreases; however, current trends show life expectancy will continue to increase at a steady rate. Over the past 70 years, the average life expectancy has increased by 2.2 years every decade, from an average life expectancy of 65.6 years for men and 71.1 years for women in 1950 to 78.7 years for men and 81.3 years for women in 2015. But these numbers are simply averages; in 2019 individuals can easily expect to live into their early and late 90’s. Health-conscious individuals should consider the possibility of living to 100, like famed National Senior Games runner Julia "Hurricane" Hawkins!
So, why is the average human population life expectancy increasing? With exponential increases in modern medicine and technology, the healthcare system has improved the sustainability and quality of life as people age. Immunizations and pharmaceuticals are direct catalysts to increasing life expectancies, as well as quicker recovery times after major surgeries, such as knee and hip replacements. Patients can get back on their feet quicker than ever to maintain their quality of life and health.
While a longer life expectancy gives individuals a chance to live a fuller life, there is a risk to this increased longevity: outliving one’s retirement funds as retirement ages decrease.
Workers born in 1940 had an average life expectancy of 61 years old and the average retirement age was 70. Seems a little reversed right?
However, as the economy has grown, working Americans’ salaries and savings have increased, allowing workers to retire before reaching their Full Retirement Age. What does this mean? As the average working American expects to retire earlier, simultaneously expecting to live longer, money in retirement needs to last longer than ever before. Retiring at 65, individuals must consider that their retirement funds must keep up with inflation and last 15-20+ years!
Generally, most Americans contribute to retirement accounts that are reliant on market performance. Depending on the amount of contributions an employee has made to their retirement plan and market conditions entering retirement, retirees face one of their biggest risks: outliving their retirement funds. This is where an employee considering retirement should ask themselves the question of quality vs quantity: is it better to have a shorter retirement with higher quality of life, or higher quantity of retirement years with lower quality of life?
At what age do you plan to retire? What age do you expect to live to? Will your retirement savings last that long? How do you plan to decrease your longevity risk? At Pathfinder Wealth Consulting we will make sure you do not lose sleep at night due to worrying about these questions. Our team of CERTIFIED FINANCIAL PLANNER™ Professionals will take a comprehensive look at your financial life, taking into consideration increasing longevity and other key issues that will impact your retirement. If you are ready to get started on the path to a successful retirement, call us at 910-793-0616 or visit our website for more information.
4018 Oleander Dr, Suite 102, Wilmington, NC 28403 | 910.793.0616 office | 910.793.0617 fax | www.pwcpath.com
Advisory services offered through Commonwealth Financial Network®, a Registered Investment Adviser.
Jason Wheeler is currently the CEO and a Wealth Consultant at Pathfinder Wealth Consulting. Pathfinder specializes in comprehensive financial, estate and tax planning services, investment management, and risk management (insurance) for business owners and successful executives. Jason Wheeler offers securities and advisory services through Commonwealth Financial Network®. Member FINRA, SIPC, a Registered Investment Adviser. To learn more about Pathfinder Wealth Consulting, visit www.pwcpath.com. Jason can be reached at [email protected] or 910-793-0616.
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