Retirement planning is notoriously difficult because it requires you to plan for an estimated period. You cannot know if you would spend 5 or 35 years in retirement- or if you would even get to retire at all. This is where life expectancy is valuable. You can use life expectancy as a guide to retirement planning and issues surrounding it. In addition to this, there is a clear link between retirement age and life expectancy, according to research conducted by LIMRA.
You should base the period that you plan for retirement on your expected life span. Retirement planners normally suggest that you should cater for a minimum of thirty years of retirement. This is not too far-fetched. For instance, the average age of death for a male in the U.S. is close to 80 years. This suggests that some men have lived way beyond this average. To be safe, you should cater for living to 90 at least. That means that if you retire at 50, you should definitely plan for 30-plus years.
You can estimate your minimum retirement period from the average life span. Some might argue that some life spans do not reach near the averages. That is quite right. However, it is prudent and wise to plan for too long than too short. If you plan for a longer retirement and die sooner, you will leave an estate. If you plan for a short retirement period and live longer, you will be begging for bread.
The combination of retirement age and life span is the best gauge for your planning period. Research by LIMRA indicates that early retirees live longer. Those who retire at 50 can expect to live until 86! A 60-year old retiree can expect to live up to 76, while those who push the envelope and retire at 65 can expect to live until 66. This does not mean that later retirement requires little or no planning, however. You could be one of those who live way past the averages.
Gender differences in life spans also affect retirement plans. Women should plan for a longer period than men should. The corollary of a longer life for women is that they receive lower annuity payments and retirement benefits. Women with male partners also have to consider the impact of life expectancy on their retirement circumstances. Married women are more likely to survive their spouse and should anticipate this.
The higher life expectancy average also increases the various risks associated with retirement. Retirees have a greater risk of outliving their savings, having inflation devalue over a longer period and spending a longer time with health concerns. Living longer is a double-edged sword. There is more time in retirement to enjoy but greater risks and potential burdens to bear as well.
Thinking about life expectancy also has implications beyond health and finances. Retirees must think about how they would remain socially active, especially when those in their social circle may fall ill or pass away. Those with a longer life span have a higher risk of becoming more isolated as time goes by. This is both a social and psychological issue that should be addressed as a function of life expectancy.
It is not just that life expectancy affects retirement, but that retirement affects life expectancy. The relationship between the two is necessarily reflexive. Considering life expectancy is important when gauging your retirement period, circumstances and retirement risks. A robust retirement plan includes life expectancy consideration- leading to a better-prepared retiree.
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