We tend to visualize retirement based on the experience of our parents and grandparents. The reality is, however, that our retirement will look a lot different from theirs.
Back in the 1930s – when Social Security had its start – people were expected to live to only an average age of 65. Now, the new average life expectancy is nearly 79.
Living longer means our needs and choices in retirement will be unique from those of prior generations. We need to consider the effects that working longer and being retired longer will have on our retirement planning. To prepare for this, you need to:
- Plan for a longer retirementif you want to retire as soon as you can. That means saving more and longer. Strategize with your financial planner to be sure your money will last as long as you will.
- Invest in your own human capitalto ensure your skills remain current if you think you’ll be working longer. This can mean ongoing learning in your field or exploring related careers.
- Think about how your spending patterns will changein retirement. Research shows that people spend 25 to 30% less per year in retirement than in their recent working years. This is often the result of substituting time for money – doing things yourself that you currently pay people to do.
Finally, you may also have parents (or grandparents) who are now living longer than they originally planned. As a result, it may be necessary for you to help them out financially or assist with their housing and transportation needs. Encouraging an open family conversation will give you a start on planning for this New Retirement.