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Making the mistake of living longer than you planned

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Retirement planning would be easy if we all came with a drop dead date, kind of like the use by date on a milk carton.  That’s what financial planners say.  Tell them exactly how long you’ll live and they can plan for it; start waffling and it gets harder to plan. 

Say your family always dies in their early 70s.  You could start collecting your Social Security benefits at age 62 (early retirement) based on the fact that it generally takes until about age 78 or so before you begin to lose money with  that decision should you have decided instead to wait until full retirement (age 67).  Here’s the problem, let’s say you have a rare genetic mutation and you live to age 84.  It sucks to be you, right?  Those extra 10 years or so might seem a godsend except that you planned that life would be over by now and you wouldn’t be paying for your granddaughter’s wedding present.  You planned that you wouldn’t have made friends with the neighbor and wanted to have your own wedding.  You certainly wouldn’t have planned that except for needing some help with the housework; you’re basically hale and hearty.   Eighty-four isn’t even very old.  It’s the average life expectancy for women.  Even guys can live this long.  It’s certainly feasible.

Here’s something sad though.  What seems like an okay amount of money (definitely not a great amount of money no matter when you retire) today will seem pretty insignificant in 10, 15 or 20 years so that if the really sad happens and you live to an unfortunate length of time and we’ll be pessimistic here and only plan that you’ll live until your 80s, you’re going to get tired of rice and beans.

It’s kind of hard to change your mind when you hit 75 and still haven’t fallen victim to the family disease.  Jobs aren’t nearly as plentiful for 70 year olds as they are for someone in their 60s in case you suddenly find yourself needing a little bit more money in your bank account each month.  The price of gas and even that carton of milk generally keep going up and up and up.  What you could buy with your Social Security check 10 years ago will cost more today and we’ll not even discuss the effects tying Social Security to a chained CPI will have on your check should that ever happen.

Yep.  Things will look pretty sad if you planned to die in your 70s.  They’ll look even sadder because people who get it in their heads that a certain date is the end-all and be-all, are likely to make the same sort of plan for all their important decisions so it doesn’t just impact how much money you have at the end of the month but whether or not you can live comfortably in your house and how much you’re paying for doctor visits and on and on.  The problem just escalates.

I’m reminded about the preacher we had who went on the news that the end of the world would come on Dec. 21, 2012.  People actually planned for it.  They quit their jobs, spent their money and planned to party as though there weren’t a Dec. 22, 2012.  All the partying in the world didn’t stop Dec. 22, 2012 from happening.

When I was a kid, I could watch Willard Scott congratulate people when they reached 100 years of age.  No one does that any more for a good reason.  There are 72,000 Centenarians in the United States this year and there’s likely to be 1 million by the time the last Baby Boomer celebrates their 65th birthday in 2050.  Do you imagine that all those people honestly thought they would live that long?  That’s why Larry Kotlikoff advises people to consider Social Security as insurance against the mistake of failing to die on time.   Plan accordingly.  There are no bonus points for being right but you can’t afford to be wrong.

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