Life expectancy is one of the most important retirement planning considerations. When determining your retirement budget so that you can set a savings goal, it's essential that you consider how many years you will need to depend upon your savings. Of course, it's nearly impossible to predict your exact life expectancy, but you may be able to gain a good perspective by examining your parents' longevity and your current state of health.
Advances in medical technology mean that lifespans are increasing, and people are living longer than they expected. In fact, a majority of pre-retirees and retirees underestimate the life expectancy for people their age. In a 2012 study, researchers found that 56 percent of pre-retirees and 62 percent of current retirees underestimated their life expectancy by 2 years or more. By contrast, only 28 percent of pre-retirees and 18 percent of retirees overestimated average lifespans. Translated into retirement planning goals, this means you're more likely to underestimate how much you need to save.
Obviously, you don't want to run out of money toward the end of your life. Not only will this cause the obvious practical problems when you're unable to pay for items like rent and food, but it can cause serious personal problems as well if you're forced to rely upon children and grandchildren for support. You're unlikely to be able to return to work at this time, and you'll find yourself wishing you had better prepared for retirement.
Another consideration is the possibility of high medical bills and long-term care. As you grow older, the potential for serious medical conditions increases. It's extremely important to prepared for the burden of medical bills and nursing home expenses.
So what can you do to prevent yourself from outliving your money? First, consider retiring a couple of years later than you had originally planned. This will lessen your overall time spent in retirement, and gives you a few more years to work and boost your savings. Second, discuss your retirement planning with a qualified financial advisor or insurance broker. A professional with experience in retirement planning can help you cover all of your bases, so that you don't have to worry about running out of money in retirement.
Source: Society of Actuaries, 2012
13646 - 2014/8/21
This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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