Planning for Retirement, The Right Way

July 8, 2018
Posted in Insights
July 8, 2018 DCT Capital Fund

If you are basing your retirement savings on how long you expect to live, you might have a surprisingly tricky problem to deal with. As it turns out, the number of retirees who can accurately predict their life expectancy is around 60%. A study by the Society of Actuaries asked 26,000 people over age 50 a question that turned out to have very thought-provoking results. The survey asked, how many of the participants thought they would make it to at least 75 years old? The results showed that only around 50% the retirees who said they had no chance they would make it to age 75 were right and those who said they would make it to 75 had a 75% chance to be correct.

The Longevity of Life and Why It’s an Issue

The issue, however, comes from having too long of a lifespan regardless of what the statistics say. The study didn’t account for many untimely deaths that can make the whole process of life expectancy very unclear and difficult to predict. Most retirees underestimate the amount they must put into saving because they don’t consider how long they can expect to live. The question that still lingers remains unanswered, and it may be the question you may be asking yourself right now. How long should you expect to live? The answer; probably longer than you think.

When trying to account for your retirement savings, there are a couple of considerations you should anticipate, before budgeting. Even today’s social factors can have a role to play in how much leftover cash you may need to survive post-retirement. Unequal access to health care is a huge issue that has affected average health expectancy in America. The reality is that the citizens with higher salaries tend to live the longest.

Understanding the Statistics

These statistics can be unnerving to some. It can be hard to know where to invest properly. Not only that but with the government continuing to have a growing debt and with lifelines like Medicare and social security becoming more and more unpredictable, the time to prepare for a steady and comfortable retirement has never been more urgent than it is now.

How to Be Prepared

One solution to help you save more, in the long run, is to work longer. Although the average age of retirement is only 63, it is slowly continuing to climb year after year. Working longer gives you a couple of advantages. For one, delaying your retirement can dramatically affect how much you receive from social security checks. The longer you delay your social security, the higher you will be paid in the long run. You have the potential to earn up to 32% more depending on how long you hold off your social security payments after age 70.

You may also want to consider the drawdown of how much you accumulate. A lot of retiree’s stop at determining how much to accumulate when they figure out how much to save when in truth, that part of the process is only a minor part of the struggle. Plan for how quickly you will chip away on your savings to determine the drawdown of your retirement so that you can save accurately and as hassle-free as possible.