Just in the past week, a new world’s oldest person has been crowned. Ethel Caterham of the UK is 115 years old and she doesn’t see what the big fuss is about. She attributes her longevity to the fact that she never argues with people and just does what she wants.
More and more people are reaching these huge birthday milestones. We’re living longer than ever before. Advances in medicine, nutrition, and lifestyle awareness mean many of us will enjoy longer lifespans than our parents or grandparents ever did.
The Pew Research Center reports that the number of people who will live to 100 is expected to grow eightfold over the next 30 years. So, by 2025 there will be more than 3.7 million people over the age of 100 by 2050! That could be exciting or terrifying, depending on your perspective. And it certainly brings to mind some pressing financial questions.
A long and fulfilling life is something most all of us hope for. But a long life also creates an evolving financial situation – especially relative to retirement. As you plan for the long, fulfilling life you still have ahead of you, here are the six expenses to consider:
1. Higher healthcare costs
The longer you live, the more healthcare you’re likely to need – and the more you’ll pay for it. Routine checkups, ongoing prescriptions, unplanned surgeries or medical interventions, it can pile up extremely fast. Medicare does help to cover some costs, but it doesn’t often cover everything. Most retirees still face premiums, copays, deductibles, and potentially large out-of-pocket costs for dental, vision, hearing help, and specialty treatments.
Hold on to your hats while we deliver this news: Medical costs tend to rise faster than inflation. Now, THAT’s a tough pill to swallow. To prevent healthcare costs from quietly chipping away at your retirement savings, start budgeting for cost increases or planned for additional coverage through supplemental insurance or a health savings account.
2. A greater need for long-term care
Living well into your 80s, 90s, or beyond increases the odds that either you or your spouse will need a little extra help with the day-to-day at some point. In the event that you can’t quite talk your children into the arrangement, you’ll likely need to pay for help at home or spend time in an assisted living facility. And those services don’t come cheap.
Costs can vary significantly according to location and level of care, but no matter the specifics, care is expensive – do not underestimate its costs. Many people make the mistake of assuming they’ll never need it or that somehow it will be fully covered. Planning ahead can help ensure that your future care won’t drain your savings or burden your loved ones.
3. More exposure to market volatility
Over a 30-year or more retirement, you’re likely to experience multiple market cycles – and likely some larger downturns. And if you’re relying on investments to generate income, those rough patches do have the potential to do real damage, especially if you’re forced to sell off some assets to cover living expenses.
That’s why it’s so important to not only invest wisely in the first place but to also have a plan to protect your income from timing risk. Diversifying your income sources, building in safeguards, and having a strategy for withdrawing funds during volatile markets can all help preserve your nest egg through the ups and downs.
4. Risk of outliving your money
It’s a simple formula: a longer retirement means you’re drawing from your savings for a longer period. Even with a healthy portfolio, that creates risk – especially if your spending outpaces your investments and other income sources.
If you end up being one of those rumored centenarians (100+ year-olds) that are to proliferate, then you’re looking at a nearly 40-year stretch where you’ll need to pay for housing, food, travel, insurance, and unexpected expenses. If your plan isn’t designed with longevity in mind, you could find yourself scaling back your lifestyle (boo), or even running out of funds altogether.
5. Inflation eats into your buying power
Even modest inflation can significantly erode your purchasing power over time. We shudder to imagine it, but a gallon of milk costing $3 today might well cost $6 or more in 20 years. Groceries, utilities, travel, and services, will add up quickly when you’re spending 2025 dollars in 2055 – and especially on a fixed income.
Planning for inflation doesn’t just mean investing in growth, it means accounting for rising costs in your retirement budget. Failing to do so could result in having to reduce your quality of life down the road just to keep up.
6. Helping loved ones adds pressure
Sometimes, needs beyond your own can affect your retirement. Many retirees find themselves helping adult children with bills, covering grandkids’ education expenses, or supporting their own aging parents. These acts of generosity are done out of love, of course, but they can also strain your financial plan if they weren’t part of it from the start.
It’s not uncommon for people to dip into their retirement accounts to help a family member during a tough time. But without a solid plan, even well-meaning gifts or loans can jeopardize your own security. Finding a balance between helping others and protecting your own future is essential.
You Need A Plan You Can Count On
No one wants to reach their 80s, 90s, or even 100s with plenty of life in them but without the funds to enjoy it. However, you don’t have to leave it to chance.
With the right planning, you can extend your savings, protect yourself from rising costs, prepare for what’s next, and enjoy your dream retirement. That means building a flexible plan that evolves with you. Living longer is a gift! Let’s make sure you’re financially prepared to enjoy it! Give us a call: 952-460-3290.
