Living Longer in Retirement

65 is the traditional retirement age. But that doesn’t mean you can’t retire sooner.

Longer retirements aren’t a sign that people don’t like to work. Rather, they reflect the increasingly long lives that people are living. It’s not unusual to follow a 35-year career with an equally long retirement. In fact, today your retirement will typically last almost twice as long as your childhood, and the way you live will continue to change, just as it did as you grew up.

By 2050, there are likely to be one million people over 100 years old, a notable increase from the approximately 40,000 centenarians who were alive in 2000. This longevity is even more striking when compared to the normal life expectancy at the turn of the previous century — which was closer to 50.


Early Retirement

Late Retirement

It’s Not Just a Phase

Retirement, like childhood, is a catch-all term that describes several distinct phases in your life.

If you retire at 55 to start a second career or spend more time doing the things you love, your retirement experience is very different from someone who is also retired but is 85 — your parents, for example, or a former teacher or employer.

One of the most important differences between early and late retirement is how you spend your money — and sometimes the amount you need to live comfortably. Medical expenses may increase as you get older, for example, while some other costs, such as travel expenses, are likely to shrink.

But as long as you’re retired, you need a steady source of income. It won’t surprise you to learn that many people’s greatest fear is outliving their resources — a situation they describe as living too long.

The Rule of 72

A little quick math, using a formula called the rule of 72, demonstrates the impact of inflation and emphasizes why you need more income every year you’re retired to maintain your lifestyle. Just divide the number 72 by the annual inflation rate to estimate how quickly the prices you’re paying now will double.

At an average rate of 3%, for example, a basket of groceries that cost you $60 in 2009 would be up to $120 in 2033 (72 ÷ 3 = 24 years). And if inflation were higher, as it has been in the past and may be again, prices would increase even more quickly. With 6% inflation, prices would double in closer to 12 years.

The Inflation Factor

Inflation is one reason it’s smart to be concerned about outliving your assets — even if you expect to spend less as you get older. The easiest explanation of how inflation works is that, as time passes, prices tend to go up. Another way to put it is that over time money gradually loses its buying power.

Whatever your age, you can remember when you paid less for something and often got more — whether you’re thinking of a chocolate bar, a double feature at the movies, or your first car. And there are noticeably few things — electronic products may be an exception — that cost less than they once did because they are now in greater supply than they once were.

percent over 65

The Financial Facts of Life

The older you get, the more difficulty you’re likely to have supplementing a fixed income with second jobs or loans. Fair or not, lenders want to be sure you’ll have enough money to keep up your payments, something they often equate with a steady job.

Your chances of finding a good-paying, part- or full-time job decrease with age, too. And your willingness to work, or your ability to handle the hours, might diminish as well.

Those factors contribute to the sense of urgency many people feel about accumulating enough investment resources so that they’ll have access to the income they need. Repeated surveys show that what older adults worry about most is outliving their resources and becoming dependent on family members.

Why Inflation Happens

The classic explanation for inflation has been that it increases more quickly in periods of prosperity, and slows down during recessions, when demand for products and services drops off. What no one can ever predict is the pace of an economic cycle or the severity of a downturn.