Retirement trends: Living longer, working smarter

Everyone dreams of what retirement will look like, spending more time with family, playing more golf, or traveling the world, but how many can actually afford to live this dream? A new survey shows nearly a quarter of Americans say they don’t plan to ever retire. The IRS suggests you’ll need up to 80% of your annual income to help ensure your quality of life continues once you say goodbye to a regular paycheck.  However, retirement income needs can vary widely, so it can be helpful to work with a financial planner to help define your personal retirement goals.  When you consider the average monthly income benefit paid by the Social Security Administration is $1,177, it becomes clear that many of us need to boost our nest egg.

There is a growing trend of people transitioning away from their original careers and entering into a variety of second and third careers.  This transition allows people to continue earning an income by working far into what some would consider their retirement years. Extending your working years can alleviate some of the income burden on your portfolio and help your funds last longer.

Expect the Unexpected

There is always the possibility for unexpected events that might force people to quit work early or work longer.  These unexpected events are called “Black Swan” events and are those that defy our ability to predict them, such as: earthquakes, 9/11, and the real estate bubble that led to the Financial Crisis. When they occur, they can have a profound impact on financial markets. Even characteristic market volatility can have an effect on retirement plans, and considering the greater volatility of the current investment climate than we’ve experienced in the past, it is important to have a process to regularly gauge if you are still on track to meet your retirement goals.

In addition, people are living longer, thanks to new advances in medical care and focus on a healthier lifestyle. A longer life often means more years in retirement, which could last 30 years or more.^[1] According to a study conducted by the Society of Actuaries in 2015, a 55-year old man has a 76% chance of reaching age 90, while a woman of the same age has an 82% chance. What’s more, the probability that at least one of them will reach age 90 is 96%.

How to Save for Retirement

One of the best ways to plan for retirement is to actually plan for retirement. You need to define your goals before you can put together a roadmap to achieve your retirement goals. Creating a financial plan provides an overview of where you are with your savings and investments, assesses if you have a shortfall, and defines action steps to get you on track to reach your goals.

There are always going to be other expenses that seemingly stand in the way of saving for retirement.  Developing a budget with all of your expenses can help make retirement savings a top priority along with other necessary household expenses, such as student debt, rent payment or mortgage payment. When your retirement savings happens automatically each month, you might be surprised at how little you miss those extra dollars in your bank account.

It is important to live within your means before retirement  so you are able to save for your future  and live your dream retirement.^[2] This means sticking to a budget, avoiding the tendency to overspend on credit cards or splurging on non-essentials and a firm commitment to saving.

If you don’t see a clear path to reaching your retirement goals, consider consulting with a CERTIFIED FINANCIAL PLANNER who can help steer you in the right direction.

Madison Carter is a Financial Advisor with the Global Wealth Management Division of Morgan Stanley in Denver. She can be reached at 303-316-5169 or Madison.anne.carter@morganstanley.com.