How Much Do You Need for Retirement if You Live to Be 100?
We all ask the question, “How much do I need for retirement?” It is a very hard question to answer. The difficulty lies in the fact that it varies greatly depending on how long you live. Will you live to be 100, or 85? How long will your spouse live?
Is 100 the New 85?
The good news is that most of us are actually living a lot longer. Life expectancy is up. It’s important to keep in mind that those long lives cost more – a lot more.
If you retire at 65 and live until age 100, you are retired for 35 years. That is only 10 years less than the 45 years you might have spent working. Have you saved enough?
What Are the Chances You Will Live to Be 100?
Depending on how you look at the data, you have a good chance of living a long time. Here are a few facts from the Society of Actuaries and the Social Security Administration:
- One out of three males and one out of two females who are in their mid-50s today will live to be 90.
- For a couple who is 65 today, there is a 50% chance that one person will be alive at 92.
- If you have lived to be 65, you will likely live another 20 years, on average.
- If you live to be 75, the average life expectancy is 88.
- If you live to be 85, the average life expectancy is 92.
- And, if you live to be 95, the average life expectancy is 98.
However, statistics are not your own reality. If you are wondering whether or not you will live to be 100, Caring.com suggests a few clues that predict longevity. Here is a sampling:
- You have lots of very old family members.
- You are spry and can walk fast and far.
- You are a woman. (In 2010 there were 80,000 100-year-olds in the United States. Eighty-five percent of them were women, only 15% were men.)
- You are social and engaged in your community.
Some people use life expectancy calculators to try to determine how long they will live. While there is absolutely no guarantee of accuracy, here are some of the most respected calculators:
- Livingto100: This calculator is based on data from the New England Centenarian Study, the largest study in the world of people who live to 100.
- Vitality Compass: The Vitality Compass is the life expectancy calculator from Blue Zones.
How Much Do You Need if You Do Live to Be 100?
Even if you knew that you would live to be 100, the answer to the question of how much you need for retirement is still tricky to answer. It all depends on how much you spend, if those expenses change over time, if you have expensive health issues, how much of your retirement income is guaranteed for life, etc.
Perhaps the best way to figure out how much more you will need if you live to be 100 vs. 85 is to use a retirement calculator that lets you change your longevity.
The NewRetirement retirement calculator calls your life expectancy your “goal age.” The system shows you your expected life expectancy, then you can set whatever goal age you want. Using all of your own data, you can try different scenarios to see how much more you need if you expect to live to be 100.
How Can You Possibly Create a Secure Retirement Plan that Gets You to 100?
It may sound impossible, but you may be able to afford a long life. Here are a few tips if you want to live to be 100:
Delay Social Security
Barring government meltdown, Social Security income does not dry up. The real value of your Social Security benefits is that you will continue to get them no matter how long you live. So, if you want to live till 100, it is best to delay the start of your benefits to really maximize your monthly income.
The longer you wait, the bigger your monthly Social Security check will be. If you wait until at least your full retirement age (around 66), your check will be about 30% larger than if you started at 62. And, delaying until 70 gets benefits that are 75% higher.
If you work longer, either by delaying retirement or with some kind of retirement job, you will be able to afford to live longer. And, research suggests that working is one of the factors that can help you achieve a longer life.
Consider a Lifetime Annuity
Adequate guaranteed lifetime income is the key to paying for a long life. A lifetime annuity is like a pension that you buy for yourself. In exchange for a lump-sum of money, you get monthly income that is paid for as long as you live – no matter how long that is. Use an annuity calculator or do the calculations as part of the NewRetirement retirement calculator.
Evaluate Tapping Home Equity
If you own your home, it is likely your most valuable asset. Home equity is becoming an increasingly popular way to fund long lives.
As part of planning your retirement, you should explore how you could release your home equity and whether or not the money can fund a retirement where you live to be 100.
Retirement planning requires a give and take between what you want now and what you will need in the future. You don’t want to spend all of your assets in the first 10 years of retirement. However, you don’t want to over-economize and get to 85 or 100 wishing that you had spent a little more.
The NewRetirement calculator enables you to adjust your expenses for different phases of your retirement. You might want to live large when you first retire, then slow down and spend less, and then maybe really gear down and spend very little when you hit 85. Just be prepared for costs to skyrocket near the end of your life to cover medical expenses. Play around with the inputs to find budgets for every phase of your life – even age 100.