5/13/2013 7:00 PM ET|
8 fiscal strategies for a long life
Americans are living longer than ever before, and that means retirements last longer, too. Here are 8 tips for a long, financially healthy retirement.
Americans' continuing longevity gains may be the ultimate good-news-bad-news story of our time. The longer we live, ironically, the higher our stress levels rise about outliving our money, enjoying a good retirement and being able to afford long-term care expenses.
Our retirement savings are already inadequate. Health care costs continue to soar. And the major programs that help us afford our later years -- Social Security and Medicare -- face cuts to help balance the federal budget. No wonder retirement confidence surveys continue to find us largely depressed about our financial futures, even as stocks rally and the economic recovery appears to finally be picking up some steam.
For folks already at retirement age, life expectancies have continued to increase. A 65-year-old man is expected to live, on average, another 17.6 years. A 65-year-old woman would live, on average, another 20.3. In recent years, these figures have been rising by one or two tenths of a percent each year. It should be stressed that these are averages. The ranks of the "old old" -- people age 85 and up -- are soaring.
Here are eight strategies to help you enjoy your later years and take advantage of the medical and lifestyle changes that are helping us live longer and longer.
1. Cut current consumption. There is no way around it. You should seriously consider foregoing spending today so the dollars will be there for you tomorrow. Increasingly, we understand the long-term challenges of retirement, and believe we've entered a "new normal" period that will require downsizing and sacrifices. We may have changed our perceptions but we have not changed our retirement planning and savings behaviors nearly enough.
2. Maintain more aggressive investment portfolios. Target-date funds got slammed during the market meltdown for being overly invested in stocks. These funds are designed to reflect "best thinking" about the needs of people in different age groups, and have become the leading default investment choices in 401k plans. Despite the criticisms, the managers of many target-date funds argue that longevity gains require older investors to keep higher percentages of their retirement funds in stocks and other higher-earning, higher-risk securities. Stocks are coming off a great first quarter and bullish sentiment is ascendant on Wall Street.
3. Inflation-proof your life. The impact of inflation, even at low annual rates, can be devastating to fixed incomes over the increasingly long life spans that many of us will have. Think hard about sacrificing some current investment returns in exchange for TIPS (Treasury Inflation Protected Securities) and other yield-sensitive holdings that will help your returns keep pace with future rates of inflation. Do some contingency plans for a high-inflation future. What would your annual spending needs look like if inflation averaged 3 or 4 percent a year, instead of the 1 to 2 percent we've been seeing?
4. Hit the gym. Chronic health conditions are the greatest physical and financial threats of old age. There are no surefire ways to prevent these problems, but taking better care of ourselves is the best -- and cheapest -- way to reduce the odds of facing devastating illnesses in later life. You already know this, of course.
5. Extend insurance coverage. Living longer means we'll need to protect ourselves and loved ones for longer periods of time. Maybe you thought your life insurance could wind down when your kids were grown, or when you hit your seventies. Think again.
6. Long-term care expenses. Imagine yourself at 85. Even a healthy 85-year-old will likely need some at-home or institutionalized care. How will you protect yourself and your family from devastating long-term care expenses? For starters, look into insurance, at least to understand what it covers and whether it makes sense for you. If you want to stay in your home for a long time, honestly assess what you need to do to make your home the kind of place that will accommodate your changed physical needs in 10 or 20 years.
7. Longevity insurance. Might it make sense to buy an annuity that doesn't begin making payments until you turn 85? You can get one for a good price, because insurers rightly figure the odds are decent that you won't survive to the age of 85, or much beyond that mark. If you knew there would be a stream of income kicking in when you turned 85, you could plan to spend down your other assets by that time and not worry about outliving your money.
8. Financial planning for women. Women face much greater retirement and longevity risks than men. Not only do they live longer, but the deaths of their husbands usually place them at a financial disadvantage. This is especially true for women who have had careers and pull down solid Social Security benefits. Dual-earning households can receive two decent Social Security payments each month. But when one spouse dies, only the higher of the two benefits can still be received. This can sharply reduce the household income of the surviving spouse. Because that's usually a woman, it makes sense to plan today for at least several years of widowhood.
More from U.S. News & World Report:
VIDEO ON MSN MONEY
Does Philip work for an insurance company??????????????????? All the advice is stupid and no
one in their right mind would or should follow///////////////////// Buying an annuity for after you turn 85
NO NO NO NO NO NO////////////////////
Now in my 76th year...shooting for 100 or more...when I get pain I pray...I like to depend on God
as the V.A. Hospital is very slow...I have a heart condition...right artery is completely closed (inside the heart)...but about 5-6 collaterials have burst through the side of the closed artery...pumping blood and oxygen. How long will this last ? As long as My Father desires. I am very content with that. So now
I trust Him...as the Psalm says..."our times are in His hands"...and "all our days are numbered before any ot them began." Relax people...God knows exactly what He is doing. When I find out it is my last day.....I will start to laugh...you know...a real belly laugh from the Holy Spirit...why ???
Because I know where I am going, and for sure. Just returned from Brasil where I preach the Gospel
message, and strengthen believers...Work for God...He pays well...both here and in Eternity too.
Candle Of Life,
All anyone at any age can plan for is one day at a time. I'm semi-retired in my sixties and about 15 of my friends have died in the last 8 to 10 years...average age was about 58. Most of them were quite successfull but literally worked and stressed their way into an early grave...so the piles of money some of them made did nothing but buy a fancier godamn coffin. So much for planning for the good life in 'old age'. No one is getting off this planet alive so why rush things?
Go easy on yourself as best you can, and as you age, frig the money chase, the needlessly big house and the overpriced luxury car. Live simply; the stress that we create for ourselves is rewarded with a cemetery plot...we are our own worst enemy...by far. Slow down a bit ... drink some red wine, eat some dark chocolate, make love, be good to your family, enjoy your friends and always try to smile just a little more.
For in and out, above, about, below ...
'Tis nothing but a Magic shadow-show,
Played in a box whose candle is the Sun,
'Round which we Phantom figures come and go. ~ Omar Khayyam, c 12th century
Peace to all ~
some good advice, some weak. 1) save more. 2) spend less. 3) have a session with a fee based CFP. 4) talk to your significant other and both get on track.
I have always planned to see 100. My great-grandfather lived to 113 I have a half aunt who is currently 105 my mom is 88 and still very active. I have 5 aunt and uncles in their 80's. So to me 100 seems doable. I'm 58 now and take care of myself and live life to its fullest and view my life as just half over.
BTW I am NOT counting on Socialist Security for my retirement years and will never file a claim for it.
On one had I wouldn't mind living that long if life is enjoyable-but on the other if it gets to costly to live that takes the fun out of it that and havng the fear of growing old still alone makes it not so much fun to live long. I'm 30 and i'm just fine kicking the bucket when the good lord says it's my time.
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