Can You Live Long … and Prosper?

Written by: Lee Sherman

Star Trek fans will be familiar with the Vulcan greeting, “Live Long & Prosper,” a worthy pursuit but one that requires a bit of planning.

According to the UN Report, World Population Aging, despite disparities in income, more people are living past the age of 60 than in any time in history. And the trend is expected to continue, reaching 1.4 billion by 2030 and nearly 2.1 billion by 2050. If you’re in your early 60’s you can expect to live another 20 years on average according to the Social Security Administration. A third of 65-year olds will make it to 90 and 1 in 7 will live beyond age 95.

But while life expectancy can be directly correlated with advances in medical science, you will still need to be prepared for age-related illnesses such as Type II diabetes, heart disease, memory loss, or cancer, that can occur in your advancing years. Increasing your life expectancy will increase your chances of contracting these illnesses. To paraphrase the comedian Ricky Gervais, you may live 10 years longer but these are the worst 10 years of your life. Fortunately, they don’t have to be the poorest.

Getting your finances in order now, while you are still of sound mind and body can go a long way toward making your sunset years as good as they can possibly be. You’ll need to budget and save money just as you are already doing. But you’ll need to accommodate for a longer event horizon than you might have earlier considered. If 60 is the new 40, then living to 100 (once unthinkable) can be something to look forward to, all kidding aside.

The longer you live, the more likely you are going to need some kind of long-term care for either yourself or a loved one. You may think Medicare has you covered but Medicare doesn’t cover out-of-pocket costs such as a nursing home, assisted living, or even something as seemingly simple as needing help with eating, bathing, or dressing.

If you can afford the additional several hundred dollars a month, you should add supplemental insurance such as Medigap to cover any out-of-pocket expenses not covered by Medicare so you aren’t hit with bills that can wipe out your retirement savings. It’s important to remember however, that Medigap might still not be enough. Long-term care insurance can be used to supplement what is available from Medicare, Medigap and State Medicaid programs.

When you retire, you’ll be drawing on your savings for your living expenses but the old rule of thumb which suggests that taking out 4% annually can last over the course of a 30-year retirement may not hold up if you live to 95 or 100.

To make sure you’ve got enough, financial advisors suggest you make sure to have a growth component in your portfolio. This could be a simple as balancing a portfolio containing mutual funds, bonds, and cash with a handful of more risky growth stocks to mitigate against inflation and help you ride out periods of recession.

Lee Sherman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Lee is an experienced journalist and editor with over 30 years of expertise with a significant history of writing in the personal finance and technology arenas.

Related: Advanced Planning with High Net-Worth Clients