Editor’s note: Contributing columnist, Steve Nicklas, expresses his views and insight on various topics in Marketplace column.
What really keeps retired Americans awake at night? Terrorism? Global warming? Medical concerns?
How about living so long that they run out of money? A recent report indicates the latter issue weighs heavily on retirees, since Americans regularly live 20 or 30 years longer than past generations.
But longevity can obviously exert strains on finances. And many Americans have fears about a longer life, suggests a new report, “The Gift of Time,” by Allianz Life. “Their fears about money and a lack of planning are putting a damper on that extra time,” according to an article detailing the Allianz report. In fact, 70 percent of Americans are financially unprepared to live to 100 years of age, a real possibility today.
And “these financial fears keep them from taking risks or following their dreams,” according to Allianz. “At the same time, Americans have a clear understanding that preparation, self-discipline and a longevity plan are the keys to longer, more fulfilling lives.”
The report confirms that a solid financial plan — which addresses longevity — can remove barriers for many Americans. This can allow them to live a more fulfilled life. Of the 3,000 people who responded to Allianz’s survey, only 28 percent sought professional help with financial matters through an advisor. However, those handling finances on their own indicate:
— Nearly half would seek advice to identify solutions for guaranteed income throughout their lives.
— About one-third would seek help to plan for a longer life, and to assist with finances through the various stages of life.
“Getting help to establish the right longevity plan can build a foundation that meets both long- and short-term goals,” an Allianz representative says. “This gives people the chance to do things they’ve always wanted to do.”
Outliving your money is a pressing issue for most people. Ensuring you have guaranteed streams of income — that you cannot outlive — can help alleviate concerns. Such income streams are commonly generated by pensions, Social Security, insured bonds or CDs, and annuities.
A common financial-planning strategy is to cover your essential living expenses in retirement with these guaranteed streams of income. In this way, you can achieve peace of mind through knowing that essential expenses (food, electric, taxes, medical expenses, etc.) are fully covered by guaranteed income.
Your other retirement expenses, often categorized as lifestyle needs, might include travel, hobbies, dining out, etc. These are not essential, and could be curtailed in the event of a financial obstacle or a poor economy.
By categorizing expenses in this manner, Americans can get a better handle on what they will need in retirement. This can provide confidence on personal finances — and assurances there will be adequate money for a long, secure life.
And, according to Allianz, understanding and preparing for longevity and its financial implications can help people approach retirement in new ways. Some may pursue a hobby or second career, return to school, or take on an endeavor they only could dream about before.
Worrying about finances, or health care issues, or life events can prevent such pursuits. These can be addressed and anticipated with proper planning of your retirement life, regardless of how long it lasts.
“Having 30 extra years opens the door to taking a non-traditional life path,” an Allianz representative says. “Now, people can create a strategy that gives them the chance to live their adult lives on their own terms.”