Will I have a long retirement? Should I live longer than average? Will I have enough money to support myself in retirement? Am I saving enough for retirement? These questions are key when you’re deciding how much money to save for retirement to live comfortably and have enough money for your entire lifespan.
Obviously, no one knows how long their life will be, although it’s possible to make an educated guess. The most important thing about life expectancy is to save enough money before you retire so that you have enough money to support yourself for the entire time you’re retired. After all, it could be 30 or 40 years.
There are a variety of considerations when working at making a retirement plan, but life expectancy is an enormous factor. People used to think that they’d be lucky to live twenty years after retirement. Today, lots of people are living right into their nineties and some even live past 100! This higher lifespan is due to better lifestyles and advances in medicine.
Today one needs to assume that they’re going to need a lot of money when they retire. In fact, retirement can be so long that the average retiree should assume that he or she will need to live off the income from the principal in their savings account and never resort to using any of the principal.
Most of us prefer to think that we’ll live a long and healthy life, but a long time takes extra planning. Use a free retirement calculator that you can find online to help you figure out how much money you’ll need to maintain a comfortable lifestyle for the remainder of your life.
There are ways to give yourself an idea of your own life expectancy. You don’t want to use the tables that are used by life insurance firms and financial advisors that work well when used for groups of people, although you can give yourself a general idea of the life expectancy of the group to which you would belong. Individual life expectancy cannot be calculated like the life expectancy of a group and using one of these tables can get you into hot water. This is because you may live a whole lot longer than the average life expectancy of someone your age. Nobody can make an accurate prediction as to how long they’ll live.
One thing that’s known is that life expectancy grew dramatically in the twentieth century. Early in the century life expectancy was about fifty years. By the end of the century, it was about 80 years. Due to medical advances, it seems that life expectancy grows by leaps and bounds every year. That which was fatal last year may be survivable this year.
You can take a look at a life expectancy table and factor in your family history, your lifestyle, your personality type, and whatever it is you do for a living, but you’re just making an educated guess. There are no absolutes when it comes to the length of life.
Your Family History Can Give You Clues
It’s common and sensible to base how long you expect to live on how long your parents and grandparents lived. If your parents and grandparents all lived into their nineties, things are looking good for you to live into your nineties, too, right? If everyone died young, don’t make assumptions. You are probably living healthier than they did and will be able to take advantage of modern medical advances to boot.
Don’t ever underestimate your own life expectancy because doing this can cause you to seriously underestimate how much money you’re going to need to support yourself in retirement. You could easily run out of money right in the middle of your retirement.
Plan As If You Know That You Will Have a Long Retirement
Unless there’s some pressing reason for you to believe that you will live no more than 20 years post-retirement, you need to assume that you’ll live 40 years and plan your retirement with that idea in mind. The very worst thing that could happen is that you’ll have lots of money at the end of your life to bequeath to your children. The best thing is that you’ll have plenty of money to live comfortably in retirement without ever worrying about it running out.
If you assume that you’ll live 30 or 40 years after you retire it means that you’ll have to pledge that you won’t ever touch the principal of your savings. Forty years is a very long time to support yourself in retirement. You’ll have to live off the income from the money that you’ve saved. This concept is critical to a prosperous retirement.
A short retirement means that you can safely spend a little of the principal in your savings. But a long retirement of up to 40 years means that you will have to always take advantage of no more than the income of that principal.
You’ll also need to know the best ways to invest that principle to work around inflation and live the life you expect to live.
Pay Your House Off
A great way for retirees to ensure that they’ll have enough money to retire is to pay off their mortgage while they’re still working. This will cut down on expenditures when you retire and it will also give you a very valuable asset.
You could budget your savings to make sure that they’ll last until a certain age, but should you live past that age, you can live on your biggest asset – your mortgage-free home.
Enjoy Those Golden Years!
Having a longer life expectancy means you may live a long time to enjoy all the hard work that you did during your working years. The most important thing you can do is to make sure that you have enough savings to give you enough money to last your entire life. When formulating a retirement plan assume that you’ll live a good long time and enjoy every year of your well-deserved retirement!
About the Author:
Author Jason Munroe is extremely knowledgeable about one of his favorite subjects money! Living in Nevada with his wife and children, Jason loves to surf the Internet and considers travel to be a passion. When he’s not surfing or traveling, Jason enjoys teaching about wealth building and retirement issues.