Thanks to better nutrition, smarter health choices and medical advances, people now live longer. The average life expectancy for a newborn in 1950 was 68. Today, it is just short of 79.1 And according to the Social Security Administration, one in four 65-year-olds will live past 90 and one in ten will live past 95.2
Realizing your retirement could last 25 or 30 years is the first step to prepare financially – ideally, starting in your youth to reap maximum rewards of compound growth. Suppose, for example, you begin saving $475 per month when you’re 22 and earn an average annualized return of 8 percent. When you’re 67, you’ll have a $2,379,328 retirement fund. Wait until you’re 42, and that nest egg will only be $450,040.3 But don’t dismay if youth has passed. There is still a lot you can do, such as:
Continue working. If you can, keep working beyond the typical retirement age. This will help you accumulate more wealth, delay using savings and postpone drawing Social Security to let your benefits grow. If you retired early this year because of COVID risks, take heart. The pandemic has also increased remote work opportunities. Consider tutoring, customer service, sales, accounting, tech support or administrative work, just to name a few.
Protect your health. It’s no secret healthcare costs have grown disproportionately.It’s estimated the average couple will need $295,000 for medical expenses in retirement (not counting a potential need for long-term care).4 So, anything you can do to safeguard your health is bound to pay off in quality of life and financial savings.
Invest wisely. Although inflation has been low since the 2008 recession, it still adds up over time. Keeping all your money in overly low-risk (and likely low return) investments may not actually be wise over the long-term. Particularly in a low-interest environment, it’s difficult to grow ultra-low-risk investments. Investing a portion of funds you won’t need for a decade or more in the market provides growth potential while giving you more time to ride out market volatility.
Whatever your age, there are always ways to improve your situation. If you’d like help creating or reviewing a written strategy for retirement saving, investing or distribution, contact our office today.