Updated: May 3, 2013 12:14PM
Originally published: July 8, 2002
If you’re feeling old, or older, you’re not alone. For the first time in history, there are more Americans 65 and older than teenagers.
While teens influence pop culture--think Britney Spears and Eminem--seniors are about to have the most influence on our economy. And lest you think those over 50 are out of touch, this generation has become the fastest growing group on the Internet, spending twice as much time online as teenagers 14 to 17.
The baby boom generation, that huge post-World-War II birth surge now numbering 76 million people, has affected everything from our public schools to colleges to the job market as they passed through the system like the proverbial pig in a python. And now as the baby boomers reach retirement age, they’ll have a huge impact on everything from housing to social services to medical care.
Governments are already feeling the pinch of an aging population. And the process is just starting. If you think the government is going to have the resources to take care of you in your retirement years, better think again.
The average life expectancy for a woman turning 65 today is an additional 19.2 years; for a man it’s 15.5 years. Today there are 4.3 million Americans age 85 and older. By 2050, when today’s twenty-somethings are hoping to be retired, there will be an estimated 19.4 million Americans over age 85, squeezing the available resources.
Longer lives mean more costs and new financial issues. The real estate industry has recognized that opportunity and created a boom in assisted-living facilities. The insurance industry has recognized the need by creating new, flexible long-term care policies that allow benefits to be used for home care as well as nursing homes.
But now it’s up to the boomers to take action to ensure they get what they want in retirement. In the next couple weeks, this column will focus on steps boomers need to take now to build security for those later years.
But it’s not just boomers who need to worry. The “sandwich” generation--those with parents and children--are likely to be lunchmeat if they don’t help their parents plan for retirement. Could you finance your children’s college and your parents’ nursing home care, while planning for your own retirement?
The most valuable commodity you have is not money. It’s time. Time compounds the power of money, so you can invest less to make more--if you have time. Many people have thought that adding risk to an investment strategy is the way to make up for lack of time. They learned their lesson the hard way in the last two years.
You need time on your side
The truth is, if you don’t have time on your side in terms of saving and investing, you’ll need to add time on the other end, by working longer. Even delaying withdrawals from your retirement fund for three years, and working longer to make contributions, can make a huge difference in your retirement lifestyle. (Besides, you’d be bored in retirement, anyway.)
Once you’ve reached retirement age, your investment strategy takes a decidedly different approach. Again, many people learned the hard way that once you’ve stopped contributing to a retirement plan, you can’t take advantage of lower stock prices. You can only hope to get even on the money you’ve already invested.
Deciding how much you can withdraw to live on every year is a critical factor. And it can’t be done by the “averages.” There are too many variables. Coming up: a column on creating a retirement withdrawal strategy so your money will last as long as you do.
Once you’re retired, the biggest risk your investment portfolio can face--assuming you’ve taken a conservative strategy--is not a bear market. It’s the need to pay for long-term care at a cost of $60,000 or more, and rising, every year. You insure against the unlikely calamity of a fire in your home. Doesn’t it make sense to insure against the need for long-term care? I’ll show you how to do that in next week’s column.
Getting older is far better than the alternative. But planning ahead makes getting older even better. That’s The Savage Truth.
Terry Savage is a registered investment adviser and is on the board of directors of McDonald’s Corp. and Pennzoil-Quaker State Co. Send questions via e-mail to email@example.com. She appears weekly on WMAQ-Channel 5’s 4:30 p.m. newscast.