Longevity and Your Retirement

Longevity and Your Retirement — Understanding Longevity Aids In Retirement Planning

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Getting your finances in order is a great first step toward living comfortably in retirement. It will help you determine how to draw income from your savings once your regular paychecks stop. If you get organized early, it may help you avoid stressing about it from month to month.

In my youth I stressed freedom, and in my old age I stress order. I have made the great discovery that liberty is a product of order. - Will Durant

Determining your longevity

There are a lot of things you should factor into how you draw income in retirement. One of the most important is your longevity. Making a best guess at how long you will live can help you determine how much money to take each year, or even each month, yet still hopefully have enough to last the rest of your life.

Start calculating your probable life expectancy by looking at the Social Security Administration’s Life Expectancy Calculator. This will give you a baseline tied to your date of birth and gender, as well as life expectancies from various future ages.

For example a woman born June 30, 1963 has the following basic life expectancies:

At AgeAdditional Life Expectancy
(in years)
Estimated Total Years

50 (current age)

35.4

85.4

67 (full retirement age)

20.8

87.8

70

18.4

88.4

In addition to this gender/date-driven number, you should consider your parents’, grandparents’ and even siblings’ longevity. Did your grandmother live to be 102? Did your older sibling pass away from an illness? Are your parents fit and sharp in their 70s and 80s?

Also factor in your lifestyle. Are you active or sedentary? Do you spend your time walking or rock climbing? Would you rather bungee jump or practice yoga? Think about whether the activities you enjoy are risky or not.

Lastly, but perhaps most importantly, you must consider your own health into the equation. Think about not only your medical condition, but also your flexibility, balance, muscle strength and mental agility. These things all work together to establish your overall health.

A recent Brazilian study, published in the European Journal of Preventive Cardiology (2012), looked at the ability of thousands of people (aged 51-80) to manage a “simple” test. They had to sit on the floor and then get up without using hands, legs, knees or arms for extra support. This ability was measured on a 10 point scale where people lost a point for every hand, arm, knee or leg they needed for extra support or assistance getting up or down.

The study found that people with higher scores had the best chance of being alive six years later. The test measured what is referred to as “all-cause mortality risk.”

The Take Away

The message is, be holistic when calculating your longevity. Then use that information and your planned retirement age to figure out how many years you can expect to live in retirement. That information will help you and your financial advisor determine how much to draw from your savings each month to enjoy your retirement, while still making sure your money will last for the rest of your life.

 

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