Living to 100

It is beginning to appear that life expectancy approaching 100 years may be a realistic premise.  This raises some key questions, of which perhaps the most important is, “can you afford to live to 100?”

We are all probably familiar with the quote, “if I’d known I was going to live this long, I would have taken better care of myself”, generally attributed to Eubie Blake.  In today’s world, it might be appropriate to modify this to, “if I’d known I was going to live this long, I would have taken better care of my 401(k).”

This is a serious matter.  There are two important trends affecting retirement economics.  First, the work force is shrinking and the retired population is growing rapidly.  Today, the ratio of workers to retirees is 8-1, it is estimated that in 30 years this will drop to 4-1.  This means that there is projected to be a 50% decrease in the number of workers paying taxes to support retirement plans for retirees.

Second, fewer employers are providing pensions, particularly defined benefit plans.   Consequently, responsibility for providing for retirement is increasingly shifting to individuals.  Even with the help of expanded 401(k) plans, most of us are not saving enough.

While financing retirement should be tailored to fit individual requirements, everyone should be looking ahead and developing, and then maintaining, a strategy to meet financial requirements after retirement.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA®