Planning for Longevity in Retirement

When you blow out the candles on your birthday cake, your friends and family wish you "many happy returns of the day!" It's a goal for which all of us strive, and many more of us are achieving: according to the Social Security Administration, one out of four 65 year olds today will live to be ninety, and one out of ten will live past the age of 95! Even those current 65 year olds who don't reach those milestones expected to live longer on average: over 86 for women, and over 84 for men.

That's great news, but living longer typically means more years after retirement—and that means we need to save, invest, and plan even more wisely than we have in the past. In order for those golden years to be as golden as you'd like them to be, there are a number of steps you should begin taking now. This deliberate effort has a name: longevity planning.

Five Tips for Longevity Planning

Save Early and Often

When you're getting started in your career, or begin raising a family, it's hard to imagine, much less set aside money for, your retirement years. They seem so distant, and current expenses seem so, well, current, not to mention pressing.

If you've been lax in taking advantage of employer-sponsored retirement plans and private retirement accounts, you're not alone. But the best time to start is always now, especially if you can take advantage of matching contributions from your employer. Ask your estate planning attorney about other options, such as annuities. A variety known as "qualified longevity annuities" only begin paying out when owners reach an advanced age; their purpose is specifically to help older individuals avoid running out of funds.

Consider Deferring Retirement

If you're still in the work force, there are a number of reasons to consider staying there longer. Obviously, the longer you work, the more you'll be able to save for retirement, and the less time you'll be drawing on those retirement funds.

If you have a pension, working longer may improve your pension payments; even if you don't have a pension, your Social Security benefits will increase. A bonus for married couples: if the primary wage earner delays taking benefits beyond usual retirement age, benefit payments go up and may even increase survivor benefits.

A non-financial benefit of working longer: you'll remain engaged and active in a mentally stimulating environment.

Don't Dump Life Insurance

You've seen the TV ads from companies trying to get you to sell your life insurance policy for a benefit you can enjoy now. Doing so is a bad idea for a variety of reasons, but with respect to longevity planning, keeping your life insurance gives you the peace of mind that you'll be able to leave something behind for your heirs even if you consume all your savings and other assets during your life.

Estate taxes are not a concern for the average person, but if you have enough wealth that they may be an issue, having life insurance ensures your estate will have the liquidity to pay taxes without selling off assets.

Keep Your Eggs in Different Baskets

It's important to have a savings account, but there are advantages to having different types of savings accounts to meet different needs. You may want to have both taxable accounts, such as bank accounts, and tax-deferred accounts such as IRAs. Government bonds and Roth IRAS offer tax-free ways to save. Judicious withdrawals from the right accounts at the right time will allow you to have greater control over your income tax burden as well as to extend your resources.

Make the Right Longevity Plan for You

Your neighbor, your co-worker, and your brother-in-law may all have different ideas about how to save for an extended lifespan, but that doesn't mean that you should follow their lead. Their ideas might be great—for them, not necessarily for you. Just as with estate planning, every individual has different needs, different goals, and different circumstances. A strategy that might work well for someone else might not be the best option for you.

There are a couple of planning options that have no downside. Understanding compound interest and the time value of money is one. The earlier you can put your money in a savings or investment account where it can grow, the more growth you will achieve.

Another piece of good advice that benefits everyone is to work, as early as possible, with an estate planning and elder law attorney who has experience in asset protection and retirement distribution planning. Yes, it costs money to work with an attorney. But the increase in your wealth as a result of having sage guidance is likely to make the expense a wise investment in itself.

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