Don’t Let COVID Cloud Your Plans for a Long Retirement
Following a simple three-part formula can help maximize the gift of longevity.
Pat Tillman is best known as a former football player for the NFL’s Arizona Cardinals who turned in his cleats for a military career as an Army Ranger following the 9/11 attacks.
Oliver Wendell Holmes Jr. served notably for 30 years as an associate justice of the U.S. Supreme Court in the early 20th century, retiring at age 90, making him the oldest justice in the court’s history.
Tillman was killed in Afghanistan at age 27. Mr. Holmes died at age 93. Both men, without question, made the most of the time they were given, and each left powerful, enduring legacies. One life ended abruptly, and the other went the distance. Therein lies the mystery of longevity.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
As humans, most of us seem to inherently understand that living a long, healthy and happy life is a gift to be cherished, but not one afforded everyone. Today’s longer life expectancies have even changed the way we plan for retirement. But for more than a year now, the potential for a long life, well-lived has collided with fears associated with the COVID-19 pandemic.
For many of us, this fear has formed a cloud of uncertainty that now looms over our retirement, even as we recover from the pandemic. A new paper from the National Bureau of Economic Research uses the term Survival Pessimism to describe this cloud, which simply means not expecting to live a very long life. In the study, people in their 50s, 60s and 70s underestimated their average expected lifespan. The translation: For over a year now, for many of us, the fear of dying has overshadowed living a rich and rewarding life after we retire.
What about that long life? Let’s consider a traditional retirement age. More than 10,000 people are turning 65 every day, and that number is expected to increase to 12,000 a day until it peaks in 2024. The reality is that for a couple age 65, there is an 89% chance one will make it to age 85, a 73% chance one will reach age 90, and in almost half of couples, one person will survive to at least age 95. This is according to the Society of Actuaries Longevity Illustrator as cited by the Insured Retirement Institute.
So, what could be our greater fear? The answer comes in the form of a recent survey in which some financial professionals said their clients spend less than they can safely afford. Why? They fear running out of money in retirement. In fact, 63% of people fear this more than death — from COVID-19 or any number of other causes. The reality is, many of us will benefit from the gift of longevity and we owe it to ourselves to make the most of it.
Here is a simple three-part formula for maximizing longevity in retirement — think health, wealth and wisdom.
1. Protect Your Health
As boxer Mike Tyson famously said, “Everybody has a plan until they get punched in the mouth.” And let’s face it, the pandemic has packed a big punch to our physical and mental health. While vaccines may have us on the road to COVID-19 recovery, the basic concerns of longevity health still exist. For instance, an elephant in the room larger than COVID is dementia.
Consider that 1 in 3 seniors die from Alzheimer’s or another form of dementia, and the cost for care is pricey. For example, a private room in a nursing home costs $290 per day, or $8,821 per month. Semi-private rooms average $255 per day, or $7,756 per month. Your options for covering health care and long-term care costs in retirement should be an essential part of your conversation with a financial professional.
In terms of everyday self-care, think about the habits you picked up during the pandemic and consider the fact many common diseases can be prevented with a sensible diet and exercise. While some of us have done too much kitchen grazing and Netflix binging, with time saved on daily commuting others have walked more miles than they ever thought possible and found it’s a much better way to travel. When I hit 10,000 steps a day, my exercise watch celebrates with me. Small moment, big difference.
Making positive lifestyle changes are another great way to protect the gift of longevity.
2. Insure Your Wealth
To embrace your longevity gift to and through retirement, wealth means financial security. You want assurance of enough income to meet your lifestyle and budget, sufficient investment growth to keep up with your needs and confidence in your investments.
How do you get there? Guidance from a financial professional is your starting point. Results from a recent survey of investors and financial professionals reveal that 71% of consumers say guaranteed lifetime income in addition to Social Security is highly valuable, according to the 2020 Guaranteed Lifetime Income Study by Greenwald Research and CANNEX. The study also suggests that given the events of the past year demand for such income will only increase. Additionally, more than half of financial professionals say they believe converting a portion of assets to a guaranteed stream of income would make retirees more comfortable.
3. Value Your Wisdom
How well you live in retirement has everything to do with the quality of your longevity. Finding and focusing on a defined purpose is perhaps the wisest step you can take in support of this. According to Patricia Boyle, a neuropsychologist and behavioral scientist, purpose is a very real predictor of how well a person will live and thrive as they age. People who sense that their lives are meaningful live longer and are less likely to develop a disability, suffer a stroke, develop Alzheimer's disease, or face cognitive decline.
While there was a huge gap between the number of years on earth for Pat Tillman and Oliver Wendell Holmes Jr., both embraced their gifts of longevity with passion and meaning and lived better lives for it.
The pandemic has negatively impacted many retirement plans, but on a positive note, our period in isolation may have given us time to reflect on a personal vision statement. Time defines our schedules, our stages in life, and according to lore, it even heals all wounds. How we use it makes all the difference.
As J.R.R. Tolkien said, “All we have to decide is what to do with the time that has been given us.” Since the start of the pandemic, more of us have engaged with a financial professional. What a wise move that is.
Guaranteed lifetime income can be obtained through the purchase of an annuity with an add-on living benefit. Annuities are long-term, tax-deferred vehicles designed for retirement. Variable annuities involve risk and may lose value. Earnings are taxable as ordinary income when distributed. Individuals may be subject to a 10% additional tax for withdrawals before age 59½ unless an exception to the tax is met. Add-on benefits involve cost and limitations. Guarantees are backed by the claims-paying ability of the issuer.
Jackson, its distributors, and their respective representatives do not provide tax, accounting or legal advice. You should rely on your own independent advisers as to any tax, accounting or legal statements made herein.
Jackson is the marketing name for Jackson National Life Insurance Co. (Home Office: Lansing, Mich.) and Jackson National Life Insurance Company of New York (Home Office: Purchase, N.Y.). Jackson National Life Distributors LLC.
-
The 7-Month Deadline That Sets Your Lifetime Medicare PremiumsUnderstanding Medicare enrollment is crucial, as missing deadlines can lead to permanent late enrollment penalties and gaps in coverage.
-
Retirees Living in Portugal: You Need a Post-NHR Tax StrategyWhen your 10-year Non-Habitual Resident tax break ends, you could see your tax rate soar. Take steps to plan for this change well before the NHR window closes.
-
Target-Date Fund Innovation: Built-In Income GuaranteesWith target-date funds falling short on income certainty, retirement plans should integrate guaranteed income solutions. Here is what participants can do.
-
If You're a U.S. Retiree Living in Portugal, Your Tax Plan Needs a Post-NHR Strategy ASAP
When your 10-year Non-Habitual Resident tax break ends, you could see your tax rate soar. Take steps to plan for this change well before the NHR window closes.
-
Could Target-Date Funds With Built-In Income Guarantees Be the Next Evolution in Retirement Planning?
With target-date funds falling short on income certainty, retirement plans should integrate guaranteed income solutions. Here is what participants can do.
-
Your Year-End Tax and Estate Planning Review Just Got UrgentChanging tax rules and falling interest rates mean financial planning is more important than ever as 2025 ends. There's still time to make these five key moves.
-
What Makes This Business So Successful? We Find Out From the Founder's KidsThe children of Morgan Clayton share how their father's wisdom, life experience and caring nature have turned their family business into a respected powerhouse.
-
Past Performance Is Not Indicative of Your Financial Adviser's ExpertiseMany people find a financial adviser by searching online or asking for referrals from friends or family. This can actually end up costing you big-time.
-
I'm a Financial Planner: If You're Not Doing Roth Conversions, You Need to Read ThisRoth conversions and other Roth strategies can be complex, but don't dismiss these tax planning tools outright. They could really work for you and your heirs.
-
Could Traditional Retirement Expectations Be Killing Us? A Retirement Psychologist Makes the CaseA retirement psychologist makes the case: A fulfilling retirement begins with a blueprint for living, rather than simply the accumulation of a large nest egg.
-
I'm a Financial Adviser: This Is How You Can Adapt to Social Security UncertaintyRather than letting the unknowns make you anxious, focus on building a flexible income strategy that can adapt to possible future Social Security changes.
