Longevity Planning is the New Retirement Plan
Along with longer lifespans, people are now retiring earlier too. Most people expecting to work until 65 actually stopped working at 62. Pushing their financial advisors to plan on at least 25 years of retirement, if not longer—we’ve seen some clients planning for 40 years.
When time horizons increase from a traditional 7-year retirement to 25+ years, we see clients’ goals and risk profiles change. This affects their planning needs and investment strategy. Another factor we now have to consider is the new definition of what it means to be retired.
Contrary to the fact that people have stopped working earlier in life, the percentage of individuals 65+ in the labor force has gone up in the past 20 years and is projected to increase even more in the next decade—meaning retirees are reentering the workforce.
This phenomenon is contributing to the push towards longevity planning. A retirement date is no longer when someone stops working; instead, it’s the point at which someone stops working because they need to and starts working because they want to—or when they achieve financial freedom.
Almost 40% of retirees in the survey above said they kept working because they enjoyed it. We’ve seen many of our clients do the same; they ‘retire’ but continue working in some scope because they find purpose in their work, beyond just the paycheck.
For these reasons, financial plans need to get away from a simple retirement mindset and move towards longevity planning. This type of lifetime planning addresses the items that people look for in a retirement plan but also considers factors like increasing lifespans, tax implications of working longer, and the goals for your overall wealth.
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