Retirement planning for long living

Are retirees living too long?

Well, no. But are they planning to live as long as they are living? Also no. More and more, late-middle-age men and women like me, and financial planners, are realizing that the old rules for financial retirement planning don't work any more. We need to do retirement planning for long living after retirement.

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My grandfathers were both born in 1900. They both died of natural causes, the first in 1971 and the other in 1972. No one, including their wives and children, thought that they had died prematurely. I was a senior in high school for the latter's death and I remember one of his friends observing, "Well, he got his three score and ten," a reference to Psalm 19.10, which says in the King James, "The days of our years are threescore years and ten... ."

My maternal grandfather, Harry Burkitt,
1900-1972 -- a good, long life back then.

One grandfather had been retired no more than 18 months, the other less than seven years.

Saving or investing for retirement was fairly simple then. You had a pension plan, you had Social Security. You saved money in a bank account. Maybe you invested on your own in one of the relatively few mutual funds that existed then. IRAs did not exist and almost all company pension plans were defined benefit.

But no one planned to retire at 65 and fund retirement until age 90 or longer. Extremely few men or women lived that long (although one of my great-grandfathers did live to 96, 1870-1966).

Today, however, if you hear someone died at age 71 or 72, you ask, "What happened?" That is nowadays barely out of middle age. So retirement planning has to change so that people can afford to live decently well for 20 years or more of retirement.

Just two months ago, Business Insider explained, 

America's next retirement crisis could be that baby boomers are living too long

Therefore, a short reading list:

If you're expecting a long life, take time to adjust your financial plan on CNBC.com, which states:

"About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95," according to the Social Security Administration.

43 percent of retirees underestimate by at least five years, the life expectancy for someone of their age and gender, the Society of Actuaries reports.

Planning for longevity might include working longer, adjusting investment strategies, and planning for incapacitating health problems.

How long will you live? See the Actuaries Longevity Illustrator, which, to be fair, offers a very basic calculation, but can be eye opening nonetheless.

And from Seeking Alpha, How To Retire At 62 On A Meager Million. Believe it or not, $1,000,000 on hand at the first day of retirement is not a lot if it provides your only income stream, even added to Social Security. Number one priority no matter your age: get to zero credit card debt as fast as you can. Zero, as in $0.00 balance.

If you are married or will have financial dependents after you retire, remember that funding your retirement means also funding your spouse or dependents after you die. 

How to estimate how long you will live? Family history is a big part. My wife's family, for example, has darn near achieved immortality on earth. Her father is nearing 99. His cousin is going on 105. His mother lived until 96 (his father died young from surgery complications in 1927). My wife's mother lived until 86. Many of my father-in-law's family lived to advanced ages. My own mother died at 87 and my dad is 90. 

The actuary site linked above does not take family history into account but even absent that, it tells me that I have a greater-than-50-percent chance to live to 85 and a one-in-three chance to make it to 90. My wife, though, has more than a 50 percent chance to make 90; her age-expectancy does not drop to one-third until age 95 and she has a 15 percent chance of living to triple digits. That's what I have to plan for.

What this all means is this: the question of whether we can afford to live at our same standard if we retire at age 65, only year after next for me, is less important than whether we still afford to live about as well 25 years from now, and for my wife 10 years after that. If inflation averages only 2.5 percent per year (below historical average!), a $100,000 income today will have purchasing power of only $53,100 in 25 years. Which means that to retire today on, say, 100 large per year means that you'd have to bring in $185,400 in 2043 just to stay even. 

That is a complex problem but one that we boomers have to face.

An online estimator for how long your retirement funds and savings will last is at The  Motley Fool.

End note: Even worse, "Many older Americans are living a desperate, nomadic life" -- They live in RVs and drive from one low-wage job to another.