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The professional association to which I belong meets the second Tuesday of the month. Afterward, many of the members in attendance hit a nearby Italian bistro for a buy-your-own dinner.
Last week, I exited for home alongside another long-time association member, George, who had a train to catch. I asked if he’d commuted downtown just for the meeting, and he said he hadn’t. “I had a meeting with a company down here earlier, and it looks like I’m picking up a new client,” he crowed.
Though hale and hearty, George is the very picture of a guy bearing down on that traditional retirement age of 65. I told him I admired him for being on the new business trail. And if you don’t mind my asking, I added, “How old are you?”
“I’m 76,” he responded.
Whoa! Now I was really impressed. I remarked that when I’m a bit more than three years away from octogenarian status, I want to be as vigorous as he.
“I don’t have much choice,” he said. “I’m from a line of long-lived folks.”
“Ah, people who lived into their 80s,” I guessed out loud.
“No, people who lived into their 90s,” he corrected. “So I have years to go, and besides, I don’t have a ton of savings. If that’s where you’re at, you work.”
We hear about older folks dallying in the employment pool much longer than they used to. But when you begin to encounter lots of these graying workforce members in the flesh and blood, you begin to grasp the magnitude of the paradigm shift.
Among a few earlier generations I could cite, folks past the three-quarters of a century milepost weren’t often seen looking for new business. They were seen looking for new shuffleboard partners. They weren’t seeking the right fit for their client mix. They were seeking the right fit in a new set of dentures. They weren’t pounding the pavement. They were pounding Geritol.
Those thoughts were still resonating when I got wind of a new study into attitudes about saving and retirement. Academic research has long shown a link between how long people expect to live and the age at which they hang ’em up. The new study takes this recognition a step further, examining how folks arrive at their estimates of their own life expectancy. These estimates, it turns out, have a number of significant implications for the quality of their retirement finances.
Like George, it appears, most people anchor their retirement expectations to the longevity of their forebears. They base the expectation of how long they will walk this mortal coil on how long their parents postponed the inevitable.
This has an impact on both retirement planning and retirement behaviors. It also suggests that efforts targeted at increasing knowledge about longer life expectancies may also increase the percentage of folks who plan on working longer.
Using data on people ranging in age from 50 to 61, a team made up of two researchers at the Center for Retirement Research and a Boston College doctoral student confirmed individuals base at least some of their expectation of how long they will live on the length of their parents’ lives. On average, men tend to think they have a seven-in-ten chance of living to 75, based on their parents’ lives. That guides their plans to retire at an average age of 64. Those who think they have half those odds plan to retire about four months earlier, on average. This “subjective life expectancy” also influences women’s retirement plans.
Not so fast
The study notes, however, it might be foolhardy to base subjective life expectancies on the age at which our parents passed away. “Life expectancy has risen rapidly in recent decades, so people are living longer,” the authors noted. For instance, a 65-year-old man today can expect to live to age 84, or about four years longer than men of that age in their fathers’ generation lived.
If you’re among those who expect, based on family history, to live well into your 80s, 90s or beyond, personal finance actions and behaviors that all people are encouraged to embrace should be observed even more religiously by you. These actions go well beyond simply seeking the most optimal high-yield savings accounts or the best credit cards.
Here are just a few:
- Start saving earlier. Given the power of compounding, getting started on a saving regimen earlier rather than later can make a huge difference in the bucks you’ll carry into retirement. It can be hundreds of thousands — or more.
- Be careful about fees. Loads, commissions, fees and other expenses can seriously pare your stash of savings over time. If you’re expecting to live a long time, be particularly suspect of any charges that will erode your nest egg.
- Delay taking Social Security. Lots of people jump at the chance to claim their Social Security checks at age 62. That’s far from the best course of action, say retirement planning experts.
If you have sufficient savings to allow yourself to delay beginning the stream of checks until close to age 70, you’ll add almost 80 percent to the amount you receive each month vis-à-vis what you would have earned if Social Security was taken at the earliest possible age. And you’ll lock that sum in for the rest of your life.
Remember the old line that went, “If I knew I would live this long, I’d have taken better care of myself”? It seems that might apply to financial health as well as physical health. In other words, you might be best advised to save as if your life will be long, even if you think it may be comparatively short.
That’s the long and short of it!
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