Nothing makes me stressed out more than listening to Alison Janey on these Kaiser Permanente commercials promoting retirement planning so we can all “thrive”. She is a highly paid actress. What about the rest of us who worry about our money that will be kept through retirement?
First a terminology lesson.
Life expectancy, a term that is widely used (e.g., IRS life expectancy tables) means the average age at which half of a group is dead and half is still alive. Depending on your source, the average life expectancy for an American is 78-79 years.
Then why does your financial advisor insist you turn 95? Or even 100? Because if our plan is for you to be 78 years old and to spend all your money, but you are among the 50% of people who outperform, you can live in poverty for up to 20 years.
Customers often say, “Oh, I won’t live that long. My mother died at 75 and my father at 80. ” Yes but It has been shown that only about 20 to 30% of life expectancy is caused by genetic factors, while lifestyle has about 70 to 80% of the possibilities to influence life expectancy. *
How does longevity affect your retirement savings?
Actually not at all. The number of years you plan to retire may increase or decrease your target annual spending on retirement accounts. For example, the rule of thumb “safe” payout rate for someone who retires in their mid-60s is 4% of assets. Retire in your 50s, that number goes down to 3%, wait until your 70s, it goes up to 5%.
So it doesn’t depend on your age, but on how many years you don’t want to work. Of course, some people have real illnesses that shorten their lives. However, studies show that the better educated and financially stable you are, the more likely you will live into your 90s.
According to my results from livingto100.com, I will live to the age of 97. That said, I should probably work until I was 70 and keep the pedal on the metal with these savings goals!
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