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Submitted by: Puthan(VJ) Vijayan
Puthan(VJ) Vijayan is the Principal member of PMV Investment Advisors, LLC. The firm is a Registered Investment Advisor. VJ is a Certified Estate Planner and Registered Financial Consultant, with over 15 years of planning and investment experience.
Life expectancy has doubled, in the last century.Workers are living longer and retiring earlier, and they are facing the prospect of outliving their retirement assets.The average life expectancy is nineteen years or more in retirement. Demographics are changing, the proportion of the older population is growing dramatically. Baby boomers in America are the largest demographic group. When they retire, they will have control over their retirement assets, and it is believed that those retirees would be the group with the longest lived,most educated and most affluent in history.
Statistical evaluation has determined that , by the time last baby boomer becomes 65 years, 20 percent of the US population would of retirement age. The 80 and over age group is the fastest growing group in the US.
How will the American people deal with the dramatic increase of retired persons?
Retired persons are concerned about getting sick,outliving their money,uncertain retirement future. Elder care has replaced child care as the number one dependent care in America. They are also concerned about logevity-retirees are living longer because of good health,good health care and good healthy living.
Longevity
According to US Census Bureau, by the year 2100, the United States will have approximately 5.5 million living persons over the age of 100 years old.How to measure life expectancy? Usually it can be determined with family history. Average life expectancy in the US today is 76 years. Perhaps a more accurate measurement would be life expectancy based on current age,due to quality of healthcare.It is acknowledged that primary reason why life expectancy has increased dramatically over the last century,is improvements in public health,medicine,nutrition
How long can you live? The US census Bureau predicts that the average American life expectancy will be in the mid 80's by year 2050, and peak in the 90's, unless something derails it, like medical science on aging,health issues. There is a caveat and that is healthcare is increasingly very expensive. The American worker is retiring younger,today the average retirement age is 62 years. Drawback-taxes is making it difficult for Americans to accumulate wealth they need for their longer retirement.Workers are retiring earlier, sometimes not for the right reason. It has been found that 45 percent of Americans retire sooner than they had planned, 50% because of disability or illness. How will early retirement affect their retirement plans, as their future appear longer and more expensive. It has also been found that 70% of baby boomers say they plan to work in retirement. Why?
Your money may not last-what is the likelihood of surviving to a certain age. What is the probability that at least one spouse survive to age 95 or greater?. It was found that it was 30%. The risk of longevity is the risk that you or your spouse or partnerwill outlive your rtetirement assets. Those who reached age 65,more than 50% of women and 40% of men, will live to age 85
The reality is Americans believe that they can select their own retirement schedule. Health, about 30 percent of medicare budget is spent the participant's last year of life, often for time spent in the hospital,urgent care, or a skilled nursing unit. The fact is that one out of every four of us may probably spend 18 months in long term care facility at an average cost of more than $70,000 per year. Probably, the greatest dent to lifestyles of future retirees, will come from costs of long term care insurance and nursing home fees.
Older Workers=lower pay. The employment landscape is not certain. Most pre-retirees are starting to realize the truth about how they will trunout in retirement.In 2004, a survey found that :
1)24% of pre-retirees thought that they would live in well in retirement.
2)26% believed that they would have enough money to cover basic needs.
3)23% thought they would outlive their money.
4)Financial Advisors are faced with the challenge of telling their clients that they cannot expect to make double digit percentage withdrawals from their portfolios.
5)More feasible withdrawal rate would be about 4% a year.
6)Most people will need 70 to 80% of their pre-retirement income during their retirement years.You will start to see that $1 million or even $2 million nest egg may not be enough.
7)You have prepared for retirement by doing all the right things.These preparations could all disappear by the high and very unpredictable cost of healthcare for your long life.Retirement may mean alot of things,and they will certainly all add up in cost.Also, it may be that long life may not mean what you thought it meant.
Puthan(VJ) Vijayan CEP RFC MBA,Principal Member
Independent Fee based Fiduciary Wealth Mgt,PMV Investment Advisors,LLC,20720 Watertown Road,Suite 106,Waukesha,WI 53186,Tel #262 754 1672
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