Yep. I said it. You’re not going to die for a very, long time. Even if you have a life threatening disease that 30 years ago would have been a death sentence. Diseases like cancer, Multiple Sclerosis, and HIV, used to mean you only had a few years left, but thanks to modern medicine many people with these conditions have fairly normal life expectancies. Frankly, I’m really happy about this because these horrible diseases have affected some of my closest friends, and now they’re working with wonderful doctors to live fairly “normal” lives with average life expectancies. People are living longer — a lot longer.
How Life Expectancy Has Changed In the Last Century
Can you believe that 100 years ago, in 1913, the average life expectancy was around 50 years old? Today, it is estimated that, “over 1/3 of babies born today will live to age 100,” according to this article by The Guardian. Think about this: if you just had a baby, your baby will probably live a century! Even Baby Boomers today are living longer than they ever imagined and are concerned about running out of money. Most financial planners are running retirement projections based on the assumption that Baby Boomer couples will have at least one spouse live until their 90s. That means that if you’re in your 20s or 30s today, you have to plan on living even longer! Therefore, setting aside money for the future is extremely important.
How Retirement Has Changed Over Time
When Social Security benefits first started in 1940, the average life expectancy was 62 for men and 65 for women. This benefit was meant to help the oldest Americans in their last few years of life. For the generation before the Baby Boomers, known as the Silent Generation, many had pensions in addition to their Social Security Income. Retirement planning had already changed so much in the last 35 years with the introduction of 401(k)s and Roth IRAs that I believe it will go through a major transformation for future generations. Many Baby Boomers are transitioning to “encore” careers or phasing into retirement rather then quitting work completely.
How Will Retirement Look In the Future?
I think one of the reasons that Gen Y has such a hard time planning for retirement is because:
- It’s a long way away! AND
- We can’t envision what “retirement” will look like 40 or 50 years from now.
People in their 20s and 30s are big dreamers. We want to travel, start a business, have a family, buy a home, but sometimes looking five years in the future is tough, let alone 50 years in the future! When I work with clients in their 20s and 30s I try to emphasize the importance of setting aside money for their “future” (a.k.a. retirement) because it will give them more options, flexibility, and opportunities. In addition, I focus on the immediate benefits such as how contributing to your 401(k) now, can help lower your tax bill for this year.
The truth, is that we don’t know what retirement will look like 50 years from now, but there are some trends: lack of pensions, multiple careers over one’s lifetime, and a global economy. I think all of these changes will impact the changing face of retirement. One thing we can do is: start saving now, so we have the freedom and flexibility to shape our future into whatever we dream.