Let’s say you just hit 62 years old and you’re facing the option of taking early social security. This is a great time to assess your financial status and start to make plans toward semi or full retirement.
A primary risk (reward) you probably should consider is that of your longevity. How long will you live in retirement? How long will your spouse likely live? This one variable could be the largest determinate of success or failure as it pertains to having a rewarding retirement.
According to the Social Security Administration, one out of every four 65 year olds will live past 90. And this number is growing.
The World Health Organization reported in 2016 that global life expectancy increased 5 years from 2000 to 2015. In fact, we’re adding three months to our life expectancies every year, according to the the National Institute on Aging.
Furthermore, the Pew Research Center says that the world had more than four times as many centenarians in 2015 as it did in 1990. I have one acquaintance who is 106 and appears in excellent health with a great sense of humor.
Why are life expectancies growing so dramatically? One reason is the rapid advancements in biotechnology, neurosciences and health care.
One of the biggest and most-exciting stories involves a gene editing technology called CRISPR. This innovation has dramatically increased the precision and decreased the time and cost of gene editing. What used to take months is now done in days.
Recently, scientists from the University of Texas Southwestern used it to halt the progress of Duchenne muscular dystrophy in dogs. The intent is to one day do the same for humans.
Imagine the possibilities and implications of this single initiative amongst a myriad of other medical innovations that are being trialed.
What will life expectancy do in the next 15 years? Since medicine is so closely linked to technology, consider Moore’s Law in layman’s terms: Technology will exponentially get smaller, cheaper and faster. It is highly likely that we could see a further increase in life expectancy of considerably more than 5 years during the next 15 years.
Bottom line: It is not only possible but probable that many of today’s early 60 year olds may be looking at a 40-year retirement. Imagine that -- spending more time in retirement than you did working.
As you process this, you might recognize there are several “problems” that might arise from such a lengthy period.
The first issue to consider is how you plan to finance your current lifestyle for an additional 40 years without employment? If you live to 100, will your savings and investments still be around to support you?
A couple of issues to consider and research:
Sequence risk: The unknown order of investment returns and interest rates. Early losses can be devastating.
Inflation risk: Increases in prices, particularly on necessities such as housing, transportation, food and health care. Be wary of the lure of yields.
Budget risk: Miscalculating what you may need to spend and thus spending down your investments too quickly in retirement. Review and understand healthcare and long term care costs.
Consider meeting with a certified financial planner to discuss these issues and to personalize a strategy on how to address them before you quit your job. Start building your support network and share your unique needs and issues with your advisory team.
Get your basic estate plan in order so that if life throws you a curveball, your family isn’t left trying to put the pieces of the puzzle together.
The next issues you should consider involve maintaining your mental acuity and physical fitness. As they say in medicine, prevention is better than the cure and it’s far less expensive.
You may not feel it at 62 but the decisions you make today will have a great impact on your abilities in the future.
Additionally, you will want to start thinking about contingency plans for housing, mobility, and relationships as you approach your 80’s as these may very well change due to deteriorating health and circumstances.
Lastly, embrace your new life. We are the luckiest generation to have this opportunity of a lengthy and prosperous retirement.
Technology has provided us so many resources to make this the best time of your life.
Also, you might want to heavily consider delaying that Social security decision.
Gardner Sherrill, CFP, MBA, is an independent wealth adviser with Sherrill Wealth Management in Bradenton. To learn more, visit sherrillwealth.com.