Retirement Strategies Beyond Age 65

 Retirement Strategies Beyond Age 65

Retirement Strategies Beyond Age 65(Image-Getty)

If you've reached the age of 65 and you're currently reading this, it's highly likely that your lifespan is going to extend much further than you might have initially thought.

Regrettably, the situation is such that you will undoubtedly need financial resources to sustain this extended period of life, and it's plausible that you'll need to adjust your retirement financial calculations to accommodate this new reality.

This revelation stems from a recent comprehensive report originating from the collaboration between the TIAA Institute and the Global Financial Literacy Excellence Center. Their findings indicate a concerning deficiency in our collective understanding of our "longevity literacy," or our ability to accurately estimate how long we can expect to live.

Surya Kolluri, the leader of the TIAA Institute, highlights the disconcerting fact that merely one-third of Americans possess an accurate grasp of the duration of retirement life. Specifically, 31% of individuals underestimate their life expectancy, while 35% admit to not having any idea about it.

When you've successfully reached the age of 65, the perspective on your life expectancy shifts from the broader average, which currently stands at around 76.1 years, as reported by the Centers for Disease Control and Prevention.

The reason for this shift is that you've already surpassed numerous individuals who didn't make it to that age. Over time, this average changes: men who reach 65 can anticipate living until 84, while women are looking at an even longer life expectancy, typically around 87.

It's crucial to note that these figures are averages, implying that many individuals might live even longer. For those fortunate enough to reach 65, statistics reveal that approximately 30% of men and 40% of women will live to the age of 90 and beyond.

Conversely, from a different standpoint, the probability of not making it to 70 is exceptionally low for those who reach 65, estimated to be between 5-10% for men and less than 5% for women.

David Demming, a financial planner at Demming Financial Services in Aurora, Ohio, stresses the realness of "longevity risk." He recounts recent meetings with clients aged 95, 97, and 100, where he observed both cases of prudent financial planning resulting in ample resources and instances where inadequate planning has led to financial struggles in later years.

While aiming for a lifespan extending into triple digits might seem like a daunting task, it's worth considering since it's within the realm of possibility. To ensure preparedness for such a scenario, adjustments to your retirement strategy might be necessary.

Here are a few strategies to reconsider and recalibrate for a prolonged lifespan:

1. Maintain Investments in Stocks During Retirement:

 Traditionally, retirement portfolios shifted towards safer assets like bonds and cash. However, given the potential of another two or even three decades post-65, this allocation might not be sufficient. It's advisable to retain a portion of higher-risk, higher-return assets such as stocks well into your retirement phase. Even if there are temporary stock market downturns, the extended timeframe allows for recovery from losses.

2. Explore Guaranteed Income Products:

 The primary risk associated with longevity is the possibility of outliving your financial resources. An annuity product can mitigate this risk by providing a steady stream of monthly income until your passing. Nevertheless, it's essential to be cautious of fees and commissions associated with annuities. Additionally, investing a lump sum in an annuity poses the risk of passing away shortly after investing, thereby forfeiting the benefit of consistent income.

3. Delay Social Security Claims:

In light of prolonged life expectancies, the decision of when to commence Social Security benefits becomes more significant. Opting to begin claiming at the earliest age of 62 results in permanently reduced benefits. Conversely, postponing claims until age 70 leads to significantly larger monthly payouts throughout your lifetime. This substantial difference becomes especially noteworthy over a span of 15 to 20 years.