The Right And Wrong Way To Think About Retirement

Posted On May 1, 2018 1:07 pm

Retirement is both one of the most exciting and potentially frightening times in our lives. That’s because after decades of working hard and sometimes defining ourselves by our jobs this represents one of the biggest changes most people will ever go through. But given that a 2017 bankrate survey found that the average family has been badly undersaving for this momentous life transition, it’s natural that many people’s biggest concern is that their retirement plans will have to be pushed off for years, if not indefinitely.

Age Median Household Retirement Savings
20’s $31,000
30’s $31,600
40’s $67,000
50 to 55 $125,000
56 to 61 $164,000

(Source: Bankrate.com)

But here are some important considerations that you may not have thought of, which can make the difference between enjoying a high standard of living and feeling you’re missing out on your golden years.

You Might Live Longer Than You Think

Retirement is a relatively new concept in human history. For example in the US in 1870 of those who lived to 65 or older 90% of men still worked. Today that figure is less than 20%. But keep in mind that didn’t include a lot of people since in 1917 the average life expectancy for Americans was 51. In contrast the average retirement age today is 62.

Now there is a lot of concern among Americans, and understandably so, about that age going up over time. In fact some in Congress want to push up the full retirement age to as high as 70 as a means of reforming social security to help solve its fiscal crisis. That’s because the current social security trust fund will be depleted by 2034 and require 23% benefit reductions in order to fund itself via payroll taxes (at it was designed to be).

That’s certainly a major problem and in a future article I’ll explore the complex issue of bolstering social security in detail. But the fact is that most Americans can expect to live far longer than they might have considered likely. For example according to the Social Security Administration those men/women who retired at 65 in 1990 could expect to live about 15 and 20 years beyond that, respectively.  

Source: Social Security Administration

But as life expectancy keeps rising that could mean that peoples’ retirements could end up lasting far longer than that. For example according to the 18th international conference for Social Security Actuaries and Statisticians by 2030 retiring US men and women can be expected to live 19.5 and 21.5 years more. And in other countries its even longer.

But keep in mind those are just averages. How long you live will be dependent on your health, lifestyle, genetics, and a host of other factors. According to a study by the Hamilton Project 22% of US men and 34% of US women might live into their 90’s, which means a 25 to 30 year retirement. That brings up several troubling topics that many have not thought about.

About author

Dividend Sensei
Dividend Sensei

I'm an Army veteran and former energy dividend writer for The Motley Fool. I currently write for both Seeking Alpha, Simply Safe Dividends, and DividendSensei.com My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams, and enrich their lives. With 22 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and income streams. I'm currently on an epic quest to build a broadly diversified, high-quality, high-yield dividend growth portfolio that: 1. Pays a 5% yield 2. Offers 7% annual dividend growth 3. Pays dividends AT LEAST on a weekly, but preferably, daily basis

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