Not Your Grandmother’s Retirement – a Look at Retirement in the Modern World
Not Your Grandmother\’s Retirement – a Look at Retirement in the Modern World
By Pamela J. Sams, CRPC
NABBW’s Retirement Planning for Women Expert
According to the Centers for Disease Control and Prevention, the average life expectancy in the United States was 77.9 years as of 2007. That longer life expectancy has an impact on all aspects of society, from health care expenses and employment law to retirement planning and finances. A higher life expectancy can have its greatest impact on retirement planning, since it requires that your nest egg support you for decades after you stop working.
Working Later in Life
A longer life expectancy can mean a longer career as well as a longer retirement. With people living longer, retirement calculators and financial planning programs must factor more years into their plans. That means a larger nest egg is required to fund those decades-long retirements, and that more years of work are required to fund that nest egg. Building a nest egg capable of funding a 30-year retirement can be difficult enough, but funding a 35- or 40-year retirement requires an even larger investment of time and money.
Social Security Changes
When the Social Security system was first introduced, average life expectancy was much lower, and the number of years retirees could expect to collect benefits were far fewer. The longer life expectancy in the modern world has put a severe strain on the entire Social Security system, and one of the responses has been to raise the age at which workers can collect full benefits. Younger workers must wait until age 67 or 70 to collect their full Social Security retirement checks, and that age could rise even higher in the future. While workers on the verge of retirement can still count on their full retirement benefits, younger workers need to factor those higher ages into their retirement planning.
Plan for a Longer Retirement
If you retire at age 60, you can expect to spend at least 30, and possibly 35 to 40, years in retirement. Spending that much time in retirement requires a great deal of planning and careful investment to make sure the money you save lasts as long as you do. Some retirees choose to protect themselves with an immediate annuity, which converts a lump sum into a series of future payments for life. Others may keep more money in the stock market for better growth, while others may cut back on expenses to make their funds last longer.
Heading Back to Work
Many people already find themselves bored with the retirement lifestyle after only a few years, and that trend is likely to continue and expand as life expectancy rises and people spend more time in retirement. As people spend 30 or 40 years in retirement, many of them are likely to return to the workforce at some point, either out of economic necessity or simply from a desire to reconnect with society and the business world.
These changes and others like them are sure to impact retirement far into the future. With so many of us living longer and healthier lives in retirement, it has never been more important to start planning now. The sooner you get started, the sooner you can start enjoying the wonderful retirement lifestyle you have always dreamed of.
Pamela has been helping women and their families improve their personal and financial wealth through good financial planning for the past 10 years. She is a Financial Advisor with Financial Planning Services of Northern Virginia and her office is located in Herndon, VA. She is an investment advisor representative and offers securities and advisory services through ING Financial Partners, Inc. Financial Planning Services is not a subsidiary of, nor controlled by, ING Financial Partners. Sources for this article: 1) Income of the Population 55 or Older, 2008, Social Security Administration, 2010. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.