When will you retire?
This is a critical decision that will affect how you will spend the remaining 7% to 45% of your life, depending upon when you retire and how long you live. The percentages assume that you retire between age 55 and 70 and live until age 75 to 100.
How do you plan for something as important as retirement when (a) you don’t know how long you’re planning for, and (b) the duration may be as short as five years or as long as 45 years or more? Forget about all the other variables that are out of your control, including inflation rates, income-tax rates, and economic and political events, to name a few.
A recent study by the Center for Retirement Research at Boston College found that there’s a statistically significant relationship between an individual’s subjective life expectancy and his expectations of when he’ll retire. Specifically, the study concluded that as individuals become more optimistic about living to ages 75 to 85, they increase their expectations about working to Social Security’s milestone ages of 62, 65, and full retirement age. Consequently, they defer their planned retirement dates to later ages than those who aren’t as optimistic about their longevity.
This leads us to the question: Why are some people more optimistic than others about how long they will live? I believe there are three reasons, all of which are related to each another:
- Some people are generally more optimistic than others.
- Most of us know people, including parents and other relatives, who have lived to age 90-plus.
- The relationship between following a healthy physical and mental lifestyle and the reduction in the likelihood of contracting various illnesses and diseases is becoming better understood.
Some people are more optimistic
It’s a known fact that some people are more upbeat and are generally more optimistic than others. As an optimistic person, I know that I’m attracted to working and interacting with individuals who share my enthusiasm for life and positive outlook for the future.
I’ve had numerous discussions over the years with clients about their expectations for personal longevity. Based on my experience, I can safely conclude that in the vast majority of cases there’s a direct correlation between an individual’s outlook on life and their expectation of how long they think they will live.
I’ve had pessimistic clients in their 50s who believed that they wouldn’t make it past 65. On the opposite end of the spectrum, I’ve been fortunate to work with many spunky 80-year-olds who were confident about their chances of living to 90-plus.
We know people who have lived long lives
It’s one thing to read the U.S. Social Security Administration statistic that the life expectancy for 65-year-old males has increased from 14.7 years in 1980 to 18.7 years in 2012. It’s another thing to know people who have lived long lives.
Most of us know people, including parents and other relatives, who have celebrated their 90th birthday. While it’s still recognized as an achievement, it’s becoming more commonplace as increasing numbers of individuals pass this benchmark. Given this fact, it’s easier today for younger people to imagine, and be optimistic about, their opportunity to live a long life.
How to live a long life is becoming better understood
People have reason today to be more optimistic about their personal longevity. The ability to live a long life, while not guaranteed, is being recognized to be within our control to a certain extent and not simply a crapshoot. While genes play a role, there are other factors that are known to influence our longevity.
The relationship between following a healthy physical and mental lifestyle and the reduction in the probability of contracting various illnesses and diseases is becoming better understood. The importance of proper nutrition, regular exercise, and an overall healthy lifestyle has been proven to be related to how we handle the day-to-day stresses of life.
Assuming that the findings of the recent Center for Retirement Research at Boston College study are correct, and optimistic people not only plan to defer their retirement dates longer than others but actually do so, it pays to be an optimist. Generally speaking, fewer years of retirement requires less savings to fund retirement.
But what if optimistic people live longer? That’s the subject of another study.
Robert Klein, CPA, PFS, CFP®, RICP®, CLTC® is the founder and president of Retirement Income Center in Newport Beach, California. Bob is also the sole proprietor of Robert Klein, CPA. Bob applies his unique background, experience, expertise, and specialization in tax-sensitive retirement income planning strategies to optimize the longevity of his clients’ after-tax retirement income and assets. He does this as an independent financial advisor using customized holistic planning solutions based on each client’s needs and personality.