When people step out of their working years and into retirement, they could still have a long journey ahead — perhaps longer than they ever imagined.
Consider how much longer healthy individuals are living today compared with a century ago. For many people, retirement is far more than a brief chapter. It can stretch for decades, which means your planning needs to account for all those years if you want a fulfilling retirement rather than one weighed down by financial stress.
One key to navigating this successfully is having a healthy perspective on accepting longevity. Rather than viewing a long retirement as an obstacle to overcome, think of it as your greatest lever, a powerful tool you can use to your advantage.
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Don’t eliminate all risk
One way to leverage longevity is by understanding how your investments can complement a longer time period. Many people are tempted to strip nearly all risk from their portfolios as retirement approaches because they worry they won’t have time to recover from a market downturn.
While it’s true that significant volatility early in retirement can do serious damage to a portfolio (especially when you’re simultaneously withdrawing money to cover living expenses while the market is falling), that doesn’t mean a conservative approach is your only option.
Protecting every dollar isn’t always as efficient as it seems. A portion of your portfolio still needs to be positioned for growth, and that requires accepting some level of risk.
It might feel uncomfortable in this stage of life, but the risks you take should be driven by your needs, not your fears. If you hold on too tightly and suffocate your dollars from growing, they might run out before your retirement does.
This is exactly where longevity becomes your ally. A retirement that lasts 20 or 30 years gives your invested assets real time to recover from market setbacks and continue growing.
That doesn’t mean going all in on equities. You absolutely want to shield a portion of your money from market volatility. But keeping your entire portfolio in CDs or similar instruments that can’t keep pace with inflation isn’t safety — it’s a slow erosion of purchasing power.
A balanced investment plan helps give your money a fighting chance over the two or three decades ahead.
An important subject often left unmentioned
When planning for a retirement that could last 20 years or more, one topic deserves a prominent place in the conversation: The potential need for long-term care.
Unfortunately, too many people push this topic aside — which is understandable, but not wise. The prospect of needing a nursing home or round-the-clock in-home care isn’t a pleasant topic on which to dwell.
However, these costs can have an incredibly detrimental impact on your retirement savings if you don’t plan for them.
The fear of the cost is the other reason people disengage. When they see the numbers involved, planning can feel futile, so avoidance becomes the path of least resistance.
That fear isn’t misplaced: Long-term care is genuinely expensive. According to CareScout’s yearly Cost of Care survey, the median annual cost of a semiprivate room in a nursing home is $114,975. In-home care can run close to $80,000 annually.
These costs are precisely why planning needs to begin early. Putting it off means that when the need arises, you could find yourself scrambling to address a situation for which you never prepared, and by then, your options might be far more limited.
Those with significant wealth have more flexibility here — not because they’re less likely to need care, but because they can afford to pay for it out of pocket. For them, the plan is straightforward: Write a check when needed. Most people don’t have that option.
To start, it’s worth taking the time to review your options for covering long-term care costs. These might include a dedicated long-term care insurance plan, a life insurance policy with a long-term care rider or setting aside a portion of your savings specifically for that purpose.
This is where the right financial adviser makes a genuine difference, one who is an empowering steward rather than a cautionary money manager. The goal is to build a plan that will help navigate the uncertainties ahead by capitalizing on longevity.
A long retirement can feel like a risk — but it doesn’t have to. With the right mindset and planning, longevity becomes an opportunity, not a burden.
Ronnie Blair contributed to this article.
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