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When It Comes to Retirement: Live Longer and Work Smarter

A quarter of Americans now say they will never retire


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Everyone dreams of what retirement will look like. Whether that means spending more time with family, playing more golf, or traveling the world; how many can actually afford to live this dream?

A new survey shows that nearly a quarter of Americans don’t plan to ever retire. The IRS suggests you’ll need to save up to 80% of your annual income to ensure your quality of life continues once you retire.  However, retirement income needs can vary, so it can be helpful to 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 a variety of second and third careers.  This transition allows people to continue earning an income and work 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.

All of this is to say that retirement doesn't look like it used to. With longer life expectancy, more career options and unexpected events on the horizon, it's more important than ever to create a personalized retirement plan. 

Expect the Unexpected

There is always the possibility for unexpected events that might force people to quit work early or work longer.  These unexpected and unpredictable events are called “Black Swan” events, such as earthquakes, 9/11, and the real estate bubble that led to the Financial Crisis. When such events 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 that you are still on track to meet your retirement goals.

In addition, people are living longer, thanks to new advances in medical care and an increased focus on healthier lifestyles. A longer life often means more years in retirement, which could last 30 years or more. 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 your expenses can help make retirement savings a top priority along with other necessary household expenses, such as student debt, rent payments or mortgage payments. When your retirement savings happen 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. This means sticking to a budget, avoiding the tendency to overspend on credit cards or splurging on non-essentials and having a firm commitment to saving.

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.

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