None of us are going to get out of here alive (meaning life overall) and ignoring the fact that you are going to die is never a good idea. But since you could very well live into your mid-80s—and be retired for 20 years or more—not planning for those 20 years is a huge mistake.
Over the past several weeks I’ve been examining our retirement portfolio in order to decide on when we could/should/probably-will retire. We’ve saved all of our lives (even when we didn’t have two nickels to rub together) and thankfully are in great shape, but it turns out that most people are not and the recent economic downturn didn’t help (though investment assets and 401ks are rebounding).
BlackRock Inc. chief executive Larry Fink said during a speech Tuesday that longer life spans and underfunded retirement plans are the defining challenge of our age, and went so far as to recommend that the U.S. consider making retirement savings mandatory.
Radical? Probably not, especially if someone 25 years old expects to get anything out of social security when they retire. Yes, Fink has a vested interest in sparking interest in retirement funds management, but he’s not the only one talking about this as a crisis.
Here is the sobering part from Fink’s talk and why you need to get off your butt now and figure out how to save: Did you know that 2/3rds of Americans have saved less than $25,000 for retirement? Or that when the Social Security system was signed in to law the average 25 year old had a 50/50 chance at living until age 65?
Looking just at the male side of my family, both of my grandfather’s died at 69 years of age and my Dad (who just died in March) expected he might make it to his mid-70s. He lived until 87 years of age and even his various doctors explained to him how a couple of lifesaving procedures he’d had after retirement weren’t even available a few years prior. One surgeon even told Dad that, “If you’d been born just three years earlier it’s likely you’d be dead” and that was at age 80. Good thing he planned for retirement and was conservative with his assets.
Chances are there will be a few more medical advances in your lifetime. What if it becomes the new normal life expectancy to live to be 90 or 100 years old?
BALLPARK E$TIMATE: What to do now? There is a great tool for you to play “What if?” with called Ballpark E$timate. You can do it online, use the iOS (iPhone/iPad) app, or print out a PDF and do it the old-fashioned way (with a calculator and pencil). The punchline: DO IT. It’s a great exercise and will let you know how you’re doing (but be conservative).
ENTERPRISING INVESTOR ARTICLE: Lauren Foster (@laurenfosternyc) has a great article called, The US Retirement Crisis: Essential Reading and Resources which contains some great books, blog posts and other resources for you to learn more.
Good luck. See you when we’re oldsters and hope you don’t have to eat dog food to survive.