How to Navigate a Long Retirement.

By in ,
How to Navigate a Long Retirement.

While it’s a great thing Americans are living longer, the hurdle with getting older is shifting to how to financially prepare for a 20, 25 or even 30 year retirement.

If you have the money to afford a long, luxurious retirement, that’s fantastic. But a study by Wells Fargo shows the average age in retirement has gone up from 13 years in 1960 to 18 years in 1990 to 20 years in 2020. As life expectancy is expected to increase and retirement age remains stagnant, the researchers expect the average length of retirement to continue to extend over the next 30 years.

That means a need for an added emphasis on planning—to decide what to do with all that time as well as how to manage the financial implications. However, planning for a longer retirement is much more complex these days. Not only does your retirement nest egg have to account for more golden years, but pensions are increasingly becoming a thing of the past and Social Security benefits could be cut by 2035 if new funding sources are not secured.

That being said, let’s take a look at how you can take proactive steps to increase your ability to fund a long – and enjoyable – retirement.

Whether you just started working or you’re nearly done, you can still grow your nest egg. After all, the more savings you have going into retirement, the easier it’ll be to stretch that money out over a lengthier period of time.

There are some key strategies to adopt today to help boost your savings and pursue the retirement you envision:

  • Contributing to your 401(k): If your employer offers a traditional 401(k) plan and you are eligible, it allows you to contribute pre-tax money, which can be a significant advantage. If your employer offers a Roth 401(k) feature, which uses income after taxes rather than pre-tax funds, you should consider what your income tax bracket will be in retirement to help you decide whether this is the right choice for you.
  • Meet your employer’s match: If your employer offers to match your 401(k) plan contributions, make sure you contribute at least enough to take full advantage of the match. It’s essentially free money. Don’t leave it on the table.
  • Open an IRA: Consider establishing an individual retirement account (IRA) to help build your nest egg. You have two options: a Traditional IRA may be right for you depending on your income and whether you and/or your spouse have a workplace retirement plan. If you meet the phased out income limits, which are based on your federal tax filing status, a Roth IRA may be a good choice for you. Find out which IRA may be right for you here.
  • Take advantage of catch-up contributions: As of the calendar year you reach age 50, you’re eligible to go beyond the normal limits with catch-up contributions to IRAs and 401(k)s. So if over the years, you haven’t been able to save as much as you would have liked, catch-up contributions can help boost your retirement savings.

A flexible retirement means you may choose to work part time, or retire later in life in order to boost your retirement income.

Because people are living longer and are overall healthier, they are more inclined to keep working in some capacity after they officially “retire.” A recent survey by Simplywise revealed that 50% of current retirees are currently working and 73% of those who are not yet retired expect to work in retirement.

Working longer can also decrease the number of years you will need to rely on your retirement assets when you do retire. Find out if your planned retirement age is realistic here.

If you’re only able to save so much for retirement, and you know your Social Security benefits will only cover a portion of your total senior living expenses, then you may need to devise a plan to spend less money in general. By downsizing your home, you’ll lower your risk of depleting your nest egg prematurely.

Downsizing can make sense for both financial and logistical reasons, but it might not be an advantageous choice in every situation. Always take into consideration the upfront costs of moving house, market timing, reducing your possessions – and the sheer hassle of it all – before making the life changing decision to move home.

Do you have some extra money to spend? Don’t – save it instead. Every time you receive a raise or increase your contribution percentage, dedicate at least half of the new money to your retirement plan. And while it may be tempting to take that tax refund or salary bonus and splurge on a car or a vacation, treat yourself to something small and use the rest to help make big leaps toward your retirement goal.

Even if you think you have enough saved for a long retirement, there are bound to be expenses you haven’t anticipated or planned for. From unexpected home repair emergencies to healthcare hikes, one of the biggest retirement planning mistakes you can make is not knowing how much money you will need to live comfortably.

Anticipating a long life means taking the long view in your retirement planning. Make retirement income projections that strike a balance between the risk of spending your funds too quickly and spending them too slowly – ultimately reducing your retirement standard of living.

In addition to understanding your expected longevity, answering the following questions can bring clarity to your retirement income needs:

  • At what age do I want to retire?
  • When do I want to begin claiming any Social Security benefits for which I’m eligible?
  • Are my invested assets properly allocated?
  • Are my investment expectations realistic?
  • Am I managing current debt wisely?
  • How will inflation impact my portfolio and ability to live the life I want in retirement?
  • What medical expenses, including long-term care, can I expect to encounter?

Once you have taken the time to answer these questions, a Retirement Income Advisor can work with you to devise an appropriate retirement planning strategy that accounts for your unique goals and needs.

Are you looking for advice on how to secure a long, comfortable and enjoyable retirement? With over 20 years of experience, CKS Summit Group understands that living longer challenges traditional strategies for retirement planning.

There’s no need to go it alone; contact the retirement income experts at CKS today for a complementary strategy session.