Will Living Longer Kill You?

In an age of advanced healthcare and improved quality of life, the idea of celebrating your 100th birthday is no longer a mere fantasy. However, there’s a sinister threat that accompanies this increased longevity – the risk of outliving your financial resources. Picture this: living a vibrant, active life up until your 85th birthday, only to find yourself facing financial uncertainty in the years that follow. Living your last 5, 10, or even 15 years being both healthy, but with nearly no money is a very scary prospect. This unnerving scenario is a stark reality for many. Despite this uncomfortable potential scenario, there are proactive steps you can take today to safeguard your financial future.

The Escalating Risk

As medical breakthroughs and healthier lifestyles push life expectancy to new heights, so does the likelihood of outliving your nest egg. The traditional notion of planning for retirement at 65 may no longer suffice. With increasing numbers of individuals living well into their nineties and beyond, it’s imperative to consider the possibility of a retirement that spans several decades.

Understanding the Risks

  1. Inflation Eroding Purchasing Power: Inflation is the silent wealth eroder. What seems like a comfortable nest egg today may not hold the same value in the future. A dollar today will not have the same purchasing power in 10, 20, or 30 years.
  2. Unpredictable Healthcare Costs: Medical expenses have a notorious reputation for spiraling out of control. Unexpected health issues or the need for long-term care can quickly deplete even the most well-planned retirement savings.
  3. Longevity Risk: While living a long, fulfilling life is a dream for many, it also presents the challenge of stretching your resources further. Ensuring that your money lasts as long as you do is a critical concern.

Proactive Measures

  1. Start Early and Be Consistent: Time is your greatest ally in building a robust retirement fund. The power of compounding means that money invested early has more time to grow. Consistent contributions, even if they start small, can make a significant difference over time.
  2. Diversify Your Investments: Relying solely on one type of investment can expose you to unnecessary risks. Diversifying your portfolio across various asset classes can help manage risk and increase the potential for returns.
  3. Regularly Review and Adjust Your Plan: Your financial situation and goals will evolve over time. Regularly reviewing and adjusting your retirement plan ensures that it remains aligned with your needs and aspirations.
  4. Consider Longevity Insurance: Annuities and other longevity insurance products provide a reliable stream of income for life, offering protection against the risk of outliving your savings. Consulting a financial advisor can help you objectively explore suitable options.
  5. Factor in Healthcare Costs: Don’t underestimate the impact of healthcare expenses on your retirement budget. Consider setting aside a separate fund for medical emergencies or exploring insurance options that cover potential healthcare needs.
  6. Always Have a Financial Advisor An objective, licensed financial advisor who reviews your personal situation at least annually is imperative. Advisors keep up to date with the latest rules, investments, and technologies to help investors meet their long term needs. Viewing an advisor just like a doctor is a best practice, in that getting an annual check up is best practice for your health. Having a licensed third-party advisor is ideal for your financial well-being.

Outliving your money is a formidable risk in today’s world of extended lifespans. The good news is that with professional help, and by regularly examining your situation you can reduce that risk greatly.

Related: How To Mitigate Risk for a Paper Millionaire