Will your retirement plan last a lifetime?

What do you think the chances are you’ll live to age 75? 85? How about 90? It’s higher than you think. How would your plans for retirement change if you knew you were going to live to 100? When planning for your retirement years, you’ll be better prepared if you understand the role life expectancy should play on your savings decisions.

retirement last a lifetime

It’s an astonishing fact: The first humans expected to live to age 150 are already alive, according to experts on aging and longevity. Astonishing or not, longer life is forcing many people to rethink how (and how long) they work and focus more on increasing the quality of these longer lives rather than rushing to retirement in their relatively spry 60s.

Americans tend to underestimate their life expectancy. According to the Employee Benefit Research Institutes’ 2016 Retirement Confidence Survey, only 37% workers think they will live to age 85. However, the probability of a 65-year-old in the U.S. living to age 85 is 50%.1

The chances of living 20, 25, or 30 years after retirement are pretty high. Living longer means more money is needed—more than any prior generation. And part of the happiness enjoyed in retirement includes the ability to afford the things you need as well as what you’d like to do.

While saving for retirement can have its challenges, there are many things you can do today that can make a real difference to your (potentially very long) future.

Perception vs. reality

Short-term thinking

According to John E. Nelson, coauthor of the book What Color Is Your Parachute? For Retirement, the potential impact longevity has on retirement is not something most people plan for.

“The challenges of longevity don’t feel real to people, so they tend to make decisions that don’t recognize the potential of a long life,” says John. “It’s not that they don’t understand the idea they may live a long time, it’s just that it doesn’t feel real.

“Very rarely do people make decisions that compromise their goals for the next 10 years. So it’s hard to get people to save for a potentially long life because they don’t want to give up something in the more “real” future for some more vague, farther off time,” he explains.

“The challenges of longevity don’t feel real to people...so it’s hard to get them to save.”


Change of plans

Chances are good you may be forced to retire earlier than you had planned.

There is a considerable gap between when workers expect to retire and their actual experience. For example, only 9% of workers said they plan to retire before age 60, but 36% actually did. Sixteen percent had plans to retire between 60–64, but 29% actually did.

Many Americans actually find themselves retiring unexpectedly—a whopping 50% leave earlier than planned. The top two reasons are health problems or disability (60%) and company downsizing or closure (27%)2...two things you don’t necessarily have control over. If this happens to you, you’ll have more years to support yourself in retirement and less time to prepare for it financially.

Underestimating health care costs

The vast majority of people significantly underestimate the real costs of both acute care and long-term care. In an Employee Benefit Advisers survey, nearly half of people surveyed believe their total health care costs will not exceed $50,000 in retirement. However, according to Medicare, a 65-year-old couple retiring today will pay an average of $8,246.16 in annual premiums for Medicare Part B, Part D, and a MediGap policy. Long-term care costs, which are not covered by Medicare, can be from $40,000 to $80,000 per year. The reality is that these type of costs can deliver a very big hit depending on your level of health and number of years in retirement.

Financial challenges

Life happens

First, the good news: Workers of all ages are saving more today than just three years ago. The largest jump was for Millennials aged 25-34, who are saving a median of 7.5% of their pay (including matching contributions) toward retirement, up from 5.8%.

However, life has a way of putting pressure on savings contributions as time marches on. Competing priorities such as tackling debt, saving for childrens’ education, caring for a parent, and other living expenses often have a negative impact on retirement savings. Only 37% of Americans report they can live comfortably and still save enough for retirement. Nearly one-third (32%) report that, in the past 12 months, they have withdrawn money from retirement savings to make ends meet.3

Even more concerning, 45% of working-age households and 41% of near-retirement households have saved exactly…zero.4

The uncertain future of Social Security

Currently, over one-third of retired workers use Social Security for 90% of their income, and 24% used it as their sole source of income in 2014. However, the current estimated benefit for all retired workers is just $1,341 a month, which is just slightly over $16,000 a year.

For the past 25 years there have been about 3.3 workers per Social Security beneficiary. After 2030, the ratio will be only two workers per beneficiary. To meet the increased need, substantial change will be needed. It is uncertain exactly what that change will be and how it will affect future benefits.5

Lack of financial knowledge

According to a 2016 National Financial Capability Study, only 37% of respondents were considered to have high financial literacy, meaning they could answer four or more questions out of five on a financial literacy quiz.

Financial education is not widely available. Only 31% of respondents said they were offered financial education during their lifetime, and only 44% had parents or guardians that helped them.

Fortunately, as an educator, you have information and resources available to you through Member Benefits, including free seminars, access to personal consultations, and financial planning services to help you build your financial knowledge.

number over 90

The importance of personal savings

Wisconsin public school employees have a distinct advantage for their retirement by having Wisconsin Retirement System (WRS) benefits. For many people, if your WRS benefit is based on a full career and you take Social Security (regardless of what age you start), it can be enough to cover the basics.

But even if you retire with a long career in education behind you, it will be important to have additional savings from a 403(b) and/or IRA.You may not have considered that without additional personal savings in retirement:

  • You may be limited as to what you can afford to do, depending on your lifestyle goals (travel, social activities, eating out, hobbies, etc.).
  • If you retire early, you’ll need to pay for health care insurance until you qualify for Medicare, which could be a financial challenge.
  • You may also have more difficulty paying for health care expenses during your retirement years. You may have to work during retirement instead of volunteering or doing other things you want to do.

And the farther you are from retirement, the more things can change. For example, with everyone living longer, and 10,000 more boomers retiring every day—83.1 million boomers by 2050—the notion of Social Security being available to everyone grows slimmer. Millennials and younger generations will likely need to think about retirement differently—for example, relying less on Social Security benefits or working longer.

However, the advantage of youth is that if you start saving and planning now, you have time on your side to prepare more adequately. You may benefit from the compound interest that has the potential to accumulate in your personal account over time.

Whether you’re 20 or 50, you need to make a plan

Now that you’re thinking about longevity and how it might affect your retirement planning, it may seem overwhelming to try and meet every contingency that could happen over a potentially long lifespan. And that may not be realistic for many people. But don’t get discouraged. There are plenty of things you can do during the years before retirement that can help maximize what you’re able to save.

There are plenty of things you can do during the years before retirement that can help maximize what you’re able to save.


Make saving a priority. It’s a balancing act to prioritize day to day versus long-term spending. Track your expenses and use a budget to help balance out your financial obligations so you can make saving for retirement a priority. Using automated services such as payroll deduction or ACH make it even easier.

Open a 403(b) and/or IRA. Your personal retirement savings can help you fill financial shortfalls not covered by WRS and Social Security. In fact, personal savings makes up about 22%–46% of retirement income for most Wisconsin public school employees. Not only are retirees living longer, but they are more active in retirement than ever before—so personal savings is becoming increasingly important. The earlier you start saving, the better—but it’s never too late to start.

Take the match. Always take advantage of your employer’s match program if it’s offered. It’s money you’re entitled to and will boost your savings.

Escalate your savings. Actively adjusting the amount you contribute can really add up. For example, every year or every time you get a raise or eliminate a debt, bump up your retirement savings contribution by adding another percentage or increasing your dollar amount. If you’re age 50 and up, you can also elect to make additional catch-up contributions to your 403(b) and/or IRA accounts.

Consolidate accounts. As you move through your career, you may accumulate accounts in old workplace plans. Find out exactly what fees you’re paying, if there are any surrender charges, and other items such as contingent deferred sales charges to find out if consolidating is right for you. Consolidating also makes it easier to manage.

Understand and balance out your risk. Once you’re retired, you will need to actively monitor your accounts and make good budgetary decisions to mitigate risk so that your savings will last. Some future risks you’ll be facing include:

Inflation risk: Inflation can reduce purchasing power, create market volatility, and devalue your income.

Replacement income risk: Your income stream can decrease as a result of a drop in interest rates.

Withdrawal rate risk: You’ll need to evaluate how much you can withdraw over a certain period of time without depleting your savings to zero.

Sequence of return risk: This is the risk of receiving lower returns early on in a time when withdrawals are being made; for example, at the beginning of retirement.

You have the advantage

You have a distinct advantage by being a Wisconsin public school employee—you can get help with personalized financial planning from Member Benefits. We offer a free one-hour consultation as well as paid services to help you know what you’re getting from WRS, Social Security, and your savings, and to help you create a game plan so you can meet your financial goals and enjoy retirement. Visit weabenefits.com/financialplanning for more information.  

1 Centers for Disease Control, United States Life Tables, 2012, published November 28, 2016.

2 Employee Benefit Research Institute, Issue Brief, “2015 Retirement Confidence Survey.”

3 Planadviser, “A Rising Tide Benefits Advisers,” January 27, 2016.

4 National Institute on Retirement Security, “The Continuing Retirement Savings Crisis,” 2015 Study.

5 Social Security Administration, ssa.gov

All investment advisory services are offered through WEA Financial Advisors, Inc.

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