ON THE CORNER OF MY desk, there are two binders. One contains my financial plan and the other my longevity lifestyle plan. One is no good without the other. How can I know if I’ve saved enough money if I don’t have a clear idea of what I want to do in retirement and how much that lifestyle will cost me?
The financial services industry’s focus has been on financial planning, with the objective of helping people accumulate as much money as possible. That falls short of what retirees need for a successful retirement. The industry’s focus needs to be broadened to include longevity planning—how people can live their best life for as long as they can. Here are three of the building blocks of longevity planning:
Longevity risk. While living longer is a terrific thing, it comes with the rising risk of running out of money. “It is not realistic to finance a 30-year retirement with 30 years of work,” says John Shoven, a Stanford University economics professor. “You can’t expect to put 10% of your income aside and then finance a retirement that’s just as long.”
This risk is only going to grow, thanks to medical advances. What happens if they come up with a pill in 10 years that will help you live to age 150? Will you be able to afford it?
Longevity of income. How are you preparing yourself financially for a longer life? People who retire in their 60s now can have 30 years or more ahead of them. Traditionally, people relied on the three-legged stool of personal savings, Social Security and possibly a pension.
Longevity of health. The good news is, a person’s longevity and health are—80% of the time—determined by the lifestyle choices they make, such as diet and exercise. The bad news is, many people are making poor life choices, resulting in preventable diseases that often lead to some form of disability. It can cost them years of infirmity.
“The average American spends the last 12+ years of life with their activities at least partially and often seriously curtailed by illness, injury, or cognitive impairment,” according to the 2022 report entitled Longevity and the New Journey of Retirement. “Among those 65+, 88% are managing at least one chronic condition and nearly two-thirds have two or more chronic conditions. Over the age of 85, one in three Americans has Alzheimer’s or related dementias.”
Added to this is the financial toll of health care costs, which can catch people off guard. The report says that a “couple needs an estimated $445,000 to cover health care costs in retirement. It’s no surprise that health care costs have become retirees’ number-one financial worry.”
Retirement requires some of the most important decisions we will ever make. It involves major changes that will either positively or negatively impact the rest of our life. People contemplating retirement need to be aware that it comes with significant emotional, psychological, physical, social and financial implications that will affect their overall well-being. These challenges need to be fully understood and prepared for—before we quit the workforce.
Believe it or not, most retirements fail for non-financial reasons, rather than for financial ones. I don’t want that to happen to you, so—for the past year and a half—five of my friends and I have been working on a new book, called Longevity Lifestyle by Design, to help people prepare for a successful retirement. Our mission is to help as many retirees as possible, which is why we’re giving the book away for free.
It was written to equip retirees, and those preparing for retirement, with the framework, insights and strategies to live their best—and longest—life. After reading it, you’ll know exactly what you need to do, what not to do and, most important, why. Click on this link to download your free copy.
Mike Drak is a 38-year veteran of the financial services industry. He’s the author of Retirement Heaven or Hell, published in 2021, as well as an earlier book, Victory Lap Retirement. Mike works with his wife, an investment advisor, to help clients design a fulfilling retirement. For more on Mike, head to BoomingEncore.com. Check out his earlier articles.