By 2030, it’s estimated that 20 percent of the U.S. population will be over age 65.1 That means a fifth of all Americans will be on the fringe of retirement or already retired, a milestone that’s generally perceived to come late in life. But consider this, there are approximately 8,000 days in today’s average retirement. That’s approximately the same number of days from:2
- Birth to college graduation
- College graduation to mid-life crisis
- Mid-life crisis to retirement
Eight thousand days translates to about 22 years. That may seem long for retirement, but it’s actually quite common these days: Retire at 65 and live to 87; retire at 70 and live to 92; retire at 80 and live to 102. More people are doing this all the time.3
If you are fortunate enough to enjoy 8,000 days of retirement, you’ll need plenty of retirement savings accumulated to make it last. For many people, that may not happen. Some young people don’t save enough because they struggle to make ends meet. People in their 40s might splurge on a sporty convertible or have unexpected expenses for a family member.
Sometimes the bulk of retirement saving gets crammed into those 8,000 days between mid-life and retirement. If this scenario sounds familiar, note that we have experience working with clients who are in similar situations. One of the keys is to use today’s retirement income strategies and financial vehicles to help maximize your assets for long-term financial confidence. We can use a variety of investment and insurance products to customize a financial strategy for your unique situation.
One possible strategy to help with the concern of outliving your retirement income may be to delay starting Social Security benefits.4 For example, an economist at Boston University demonstrated a scenario in which a 66-year-old retiree begins withdrawing income from his 401(k)/IRA account while delaying Social Security until age 70. His calculations show that this strategy would yield a higher income throughout retirement than if the retiree started pulling from all income sources at full retirement age.5
Also remember that the concept of 8,000 days is a middling number. Roughly, half of retirees will die before 8,000 days and half live longer. Annuities can be an option for people who want to help ensure a portion of their retirement income will be guaranteed. An annuity is an insurance contract that can provide long-term retirement income to help protect you against longevity risk, such as a retirement spanning two decades or more.
It’s important to understand there are several different types of annuities, and they don’t all work the same way. They may offer various features; such as payout options, death benefits and potential income for your spouse. Some can offer guaranteed income (a fixed annuity) while others offer an income stream that relies on the performance of the investments you choose (a variable annuity). There may be tradeoffs for these features, like additional fees or lower income payouts.6 A financial professional can help you understand which type of annuity suits your financial needs.
1 Richard Eisenberg. Forbes. May 9, 2017. “Why Isn’t Business Preparing More for The Future of Aging?” https://www.forbes.com/sites/nextavenue/2017/05/09/why-isnt-business-preparing-more-for-the-future-of-aging/#108dfd522dec. Accessed July 31, 2017.
4 Mark Miller. The New York Times. Feb. 18, 2017. “How to Make Your Money Last as Long as
You Do.” https://www.nytimes.com/2017/02/18/your-money/retiring-longevity-planning-social-security.html. Accessed July 31, 2017.
5 Laurence Kotlikoff. Dallas News. May 5, 2017. “Which should you take first: Social Security or your 401(k)?” https://www.dallasnews.com/business/personal-finance/2017/05/05/take-first-social-security-401k. Accessed July 31, 2017.
6 CNN. 2017. “What is an annuity?” http://money.cnn.com/retirement/guide/annuities_basics.moneymag/index.htm. Accessed July 31, 2017.