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Living To Be 100
By Lee Matthew / Illustration by Robin McClannahan
WHAT IF YOU live to be 100?
The implications for financial planning are very clear: More and more Americans will have to figure out how to finance a very, very long retirement. Basically, this will mean finding ways to make sure you don't outlive your money.
Here are a few ideas to consider as you think about your retirement years:
1. Keep investing for growth.
Investing for growth may remain your best weapon against inflation. Historically, the consumer price index has risen by an average of 3.1 percent a year. At that rate, rising prices could cut your purchasing power in half every 23 years -- a potentially grim scenario if your retirement lasts twice that long. A reputable financial planner can help you develop a long-term investment strategy based on your needs as well as on your financial and emotional ability to handle the risks of different kinds of investments.
2. Spend less.
Spending less in your pre-retirement years is a good way to free up more money to add to your nest egg along the way. Then, in retirement, your necessary expenses might be even lower. Try itemizing your expenses over the past 12 months, dividing them into categories that fit your lifestyle. Pay particular attention to any "disappearing money." If studying and tracking your cash flow makes you feel poor, consider this: Research has shown that millionaires spend twice as much time analyzing expenses and reviewing goals as other people!
3. Control medical costs.
In recent years, health-care costs have been rising by as much as 8 percent a year, far more than inflation. As you experience some of the infirmities associated with growing older, these rising costs could be a real problem. The first line of defense is just common sense: Take care of yourself. If your body is going to be around for more than a hundred years, it deserves some attention. So get whatever professional medical advice you need. And don't forget the simple things -- flossing your teeth, exercising, developing a sound eating plan, and doing whatever works for you to let go of stress and open up spiritually or creatively.
A second idea for controlling health-care costs is to think about long-term care insurance. These days, it's not unusual for nursing homes to cost $3,000 a month, a figure that would quickly create a dent in most people's net worth. Long-term care policies may include features like home health care, mental as well as physical impairment, and inflation protection. The premiums on a long-term care policy may be partly tax-deductible; see your tax adviser.
4. Don't retire.
At least, consider not retiring fully at age 65. This may seem like a radical idea, but in fact the whole notion of retirement is a fairly new concept. Back in the 1930s, when Social Security was launched with benefits payable at age 65, the average lifespan was 63 years. The picture has changed a lot since then, with present life expectancies at about 75 years and rising. If you continue to work for a few years, even part time, you might be able to relieve some of the pressure on your portfolio. Then you might have a greater chance of the money still being there when you really need it.
If significant numbers of us are going to live to be 100, maybe it's time to get rid of the myth that age 65 is "old." Our 60s and 70s could arguably be viewed as the autumn of middle age, not the autumn of life. And while we're at it, let's also take a hard look at the myth that not working is somehow more desirable, more fulfilling, than working. It all depends on what we're doing and how we feel about it. For many of us, our 65th birthday could signal an opportunity to discover the most creative, satisfying work of our lives -- and a chance to pursue it for another 35 years.
Lee Matthew is a financial planner in Albuquerque.
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SAGE December 1998
How to make sure you don't outlast your money
This is not an idle question, especially for women. As the millennium approaches, the number of centenarians in the United States is sharply on the rise. According to the Harvard Health Letter, today there are 52,000 Americans age 100 or older. Demographers tell us that the over-85s are the fastest growing age group in the country, and that by the year 2040 there will be an estimated 1.3 to 4 million Americans over the age of 100.
So we're all living longer, and we'll continue to do so. This is especially true for women. Medical researchers estimate that, over the next couple of decades, women's life expectancies will increase more than men's. In industrialized countries, women are expected to live to an average age of 90 by the year 2020.
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