People are living longer and more dynamic lives than ever before, which necessitates the need to build out financial plans to allow for the resources for an enjoyable, long retirement.
Providing for a longer retirement also means providing for the challenges of reaching old age – such as diminished physical and mental capacity.
The real possibility of living to an advanced age, and the financial implications of doing so, has become a key consideration in financial decision making.
Managing wealth for a longer lifespan may require planning in many areas, including retirement, providing for future generations, philanthropic strategies and risk management.
An increase in expected lifespan can have a substantial impact on the funds required to achieve your desired lifestyle in retirement.
Conduct a financial accounting of where you are now, what you would like to spend in retirement and what you need to get there – and make sure that includes consideration of various factors such as post-retirement expenses, income from investments and/or continued employment, Social Security, defined benefit plan income and taxes.
Questions to ask and discuss with your advisor include:
- Is your current contribution rate sufficient to support an income stream for a long lifespan?
- Does the potential for a longer lifespan impact any reallocation decisions?
- Would delaying Social Security benefits be appropriate?
Passing on the wealth
Living to an advanced age may lead to complicated family and financial dynamics.
Gifting strategies are often proposed as a means of passing on wealth to children and grandchildren, as well as providing tax advantages.
One spouse remarries after becoming a widow or widower
Have you and your spouse discussed what would happen if one of you were to pass away, specifically: Would the other spouse remarry?
When a new spouse and potentially an entire new family is brought into the mix, goals may change that require estate planning adjustments.
Guarding against elder abuse
As lifespans increase, the risk of financial exploitation or abuse becomes heightened.
Trusts may be used to provide lifetime protection of assets and an effective means of passing on wealth at death. Specific types of powers of attorney may be executed to protect from financial exploitation as well.
Unintended philanthropic consequences
Living to an advanced age can affect the timing and nature of a planned gift. There are certain strategies that may need to be avoided in those cases.
Caring for an aging parent
As lifespans increase, so too does the possibility of needing long-term medical care. The financial burden of caring for an aging parent may fall upon their children, which will affect their own ability to reach financial goals.
Conflict among siblings may also arise.
Options in this type of circumstance include family members combining resources and using cash values from cash value life insurance.
As the potential for living to an advanced age increases substantially, people should take that into account when financially planning for their futures.