Data from a recent census shows that Americans today are living much longer than our predecessors. During the age of the American Revolution, Americans were expected only to live long enough to reach 23 years. A century ago, the average life expectancy was 47. For these Americans, retirement planning was virtually useless, since few people lived to see retirement age.
By comparison, today, the average 65-year-old couple has an 80 percent chance that one partner will reach 85. That’s why careful planning for the future is crucial for the modern-day American.
When planning for retirement and your estate, it’s important to consider the following factors:
Living longer than expected. With longer life expectancy comes unique financial concerns. Living longer than you had planned could mean that you outlive your savings. It’s advisable to plan for retirement with the supposition that you will live at least five years longer than your current health, lifestyle, and genetics would predict.
Passing sooner than expected. However, just because life expectancy is increasing doesn’t mean that accidents and surprises can’t happen. There is always a possibility that you may pass sooner than you expect, which is why a solid estate plan is just as vital as a good retirement plan. Through careful estate planning, you can ensure that your children, spouse, other family members are provided for, and that your retirement savings and other assets go to the people you care about.
When making arrangements for the future of you and your family, it’s a good idea to plan for every possibility. To give you a general sense of what kind of financial strategies and legal tools you can incorperate into your plan for the future, we’ve included brief guides to both the financial and estate-planning side of things below.
Financial Planning for Increased Life Expectancy
Living longer means you’ll have more time to spend with the people you love and do the things you’ve dreamed of. However, if you want to ensure your retirement is free of financial stress, you need to plan wisely.
Here are some basic retirement strategies to consider:
Saving matters. Hopefully, you have already begun saving for retirement. If not, you should start as soon as possible, putting away a certain amount every month in increasing amounts. You should set savings goals for yourself, and follow your plan strictly.
Contribute to a 401k or other retirement savings plan. If your work offers a 401k or other retirement savings plan, you should sign up and contribute the maximum amount you can. These types of plans are generally an excellent choice for retirement savings, since contributions are conveniently deducted from your paycheck and you will have to pay less in taxes.
Contribute to an IRA. With an Individual Retirement account (IRA), you can arrange to have a certain amount regularly deducted from a bank account. IRAs are smart ways to save, and offer numerous tax advantages.
Estimate your Social Security benefits. Social Security typically pays an average of about 40 percent of what your income was before you retired.
Important Estate Planning Considerations for Unexpected Passing
Just as it is important to plan for a longer life expectancy, it’s crucial to plan for an unexpectedly shorter one as well. Estate planning can help to ensure your family is left in a good financial situation after your death, and to make it so your savings, property, and other assets go to the people and organizations you care about.
To plan for the event of an unexpected passing, it’s important to:
Create a Last Will and Testament. Creating a will allows you to instruct your survivors how to distribute which assets, and to whom in the event of your unexpected passing.
Maintain liquid savings. You should maintain adequate liquid savings to support your family during the months that your estate is going through probate.
Invest in life insurance. You should take out a life insurance plan and arrange a death benefit amount that could help your family make up for your lost income, as well as to pay for special occasions such as university and marriages.
Designate beneficiaries. It’s important to make sure that you have correctly designated your intended beneficiaries on life insurance and retirement accounts.
Of course, every family and estate is unique, so it’s a good idea to consult with an estate planning attorney when planning for the future. Your probate lawyer may be able to evaluate your financial situation and present circumstances, and help you create a strong estate plan that protects your own interests, as well as the interests of the people you love.
About the Author:
Christopher Q. Wintter is the founder of Wintter & Associates, P.A. and a board-certified expert in Trust and Estate matters by the Florida Bar. With more than 24 years’ experience as a practicing attorney, he also serves as an instructor and faculty member for the National Institute of Trial Advocacy (NITA)—the nation’s leading provider of legal advocacy skills training to practicing attorneys—and has earned the AV® Preeminent™ rating with LexisNexis Martindale Hubbell. He was also selected for inclusion in Florida Super Lawyers for 2011 and 2012 in Estate and Trust Litigation.