Planning for retirement is a bit of a numbers game. It’s not just about deciding when you plan to retire, but also estimating how many years you plan to live in retirement. You also have to figure in the cost of healthcare during retirement which could include long-term care.
According to numbers from the National Retirement Planning Coalition, there’s been a significant increase in the life of a 65-year-old over the past generation.
In 1980, the average life expectancy for a 65-year-old man was 79.1 years and for a female it was 83.3 years. In 2010, that number increased by over 3 years.
While 3 years may seem small, it can have a financial impact on those living in retirement.
An example from the from the National Retirement Planning Coalition shows a 21 percent increase.
$50,000 of annual expenses in retirement
- 14 years in retirement = $700,000
- 17 years in retirement = $850,000
The example above does not include the cost of healthcare in retirement which can drive up the cost. The Insured Retirement Institute (IRI) and Health View Services estimate the cumulative health care expenses for a 65-year-old man in 201 was $370,000 and for a woman $417,000. That does not include the cost of long-term care.
The majority of workers today depend on individual account plans, defined contribution plans and individual retirement accounts to save for retirement.