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The financial consequences of living a long life


Kane Tenaka lives in Japan and loves playing board games, studying math, and practicing her calligraphy. But the most remarkable thing about Kane Tenaka is that she’s 116 years old, and was just recognized as the oldest living person in the world.

These stories are always a great wake-up call that we’re living longer than ever before.

In fact, the number of people who will live to 100 is projected to swell from 500,000 people today, to more than 3.7 million in the next 30 years.

Living a long and prosperous life is something we all wish for, but it also comes with four significant financial challenges …

#1 The longer you live, the more you’ll pay in healthcare and medical expenses.

According to the latest estimates, the total out-of-pocket spending for the average 65-year-old couple retiring today could be north of $400,000 when you factor in Medicare premiums, supplemental insurance premiums, deductibles, and copays. And those with known health issues could be on the hook for even more money!

#2 The longer you live, the greater the chance you’ll need some form of long-term care.

According to U.S. Department of Health and Human Services, Nearly 70% of all people who live to age 65 will require some form of long-term care.”

And long term care doesn’t come cheap. According to Forbes, the average cost for an assisted living facility is $47,064 per year. A semi-private room at a nursing home with around-the-clock care is $91,615 per year.

#3 The longer you live, the greater the chance you’ll face major stock market corrections.

According to Kiplinger, “From 1926-2017, bull markets lasted an average of 9 years.” If you do the math, that means every decade (or so) your savings and investments could take a major haircut. And if you must withdraw money from your retirement accounts during these market downturns (to live on, or because of Required Minimum Distributions), the long-term effects could potentially be financially devastating. 

#4 The biggest challenge of all: How do you pay for it?

The longer you live, the longer you have to make your money last in in retirement. And unfortunately, the greater the chances you have of running through your entire life savings far too soon.

According to a recent article from MarketWatch“40% of Americans are at risk of going broke in retirement.” Most people assume this will just impact the people with little means. But that’s not the case. It could also happen to people who are middle class, and even those who are wealthy. Nobody’s exempt.

Conclusion

The last place you want to be is 85 or 90 years old, full of life and flat broke.

Your best defense to ensure you don’t run out of money in retirement is to have a thorough and comprehensive financial game plan. This includes maximizing your Social Security benefits; reducing your taxes; generating income (that lasts as long as you do); a plan to protect you from the skyrocketing cost of healthcare and long term care; and managing your risk.

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