The average number of years spent in retirement continues to grow, but many boomers aren’t planning to spend several decades retired. According to the TIAA Institute’s “Retired for How Long?” report, most boomers (57%) plan to retire between ages 60 and 69 and nearly half (46%) believe they will live to age 90 or older. That means a significant portion of boomers will spend 30-plus years in retirement. Yet, only 9% are planning to spend that long in retirement.
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Failing to prepare for a long retirement is one of the most common retirement mistakes boomers make. While not every boomer will be retired for over three decades, here’s why not planning for the possibility is a misstep.
You Can Run Out of Money
The biggest risk that comes along with not planning for longevity is that you will run out of money in retirement and won’t have a way to replenish it. Simply put, you could outlive your savings.
“Underestimating the number of years you will live in retirement is like planning a cross-country road trip with only half a tank of gas in the car,” said Kourtney Gibson, CEO of TIAA Retirement Solutions. “If you do not have enough gas, you will run out before you arrive at your destination. Planning for longevity in retirement is the same. If your planning horizon is too short, you will not have enough savings to last the duration of your retirement.”
It seems many boomers don’t take the duration of their retirement into account when planning for their golden years.
“You need to save enough money for the years you may actually live in retirement in order to have enough savings to last the duration of your retirement,” said Gibson. “Yet many Americans are not saving enough because they lack longevity literacy or a basic understanding of how long they can live in retirement.”
Longevity Risk Is Serious
When planning for retirement, many Americans consider the risks of mental decline, market swings and inflation, but don’t put longevity risk on the same level.
“Longevity risk is one of four risks that threaten retirement security, and probably one of the easiest risks to offset with proper planning,” Gibson said.
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It’s Always Better To Be Overprepared
Retirees need income that lasts as long as they do. Planning for a comfortable 30-year retirement is a safer bet than falling short.
“Research shows life expectancy has increased by 17 years since the debut of Social Security nearly 90 years ago,” Gibson said. “People are living longer, and longer lifespans mean they need retirement income to last as long as they do. The road to retirement security must include strategies that provide income for the span of our retirement, whether that is 20 years, 30 years or more.
“Every generation should plan and save for longer lifespans — not shorter ones,” she continued. “That is the best way to prepare for longevity and offset the risk of running out of savings in retirement.”
3 Ways Boomers Can Prepare for a 30+ Year Retirement
Setting yourself up for a 30-plus-year retirement can be a daunting task, but it’s possible to achieve with proper planning. Even if you’re nearing retirement, there are steps you can take now to ensure your financial security for the long haul.
1. Begin With the End in Mind
Set goals for what you want your entire retirement to look like.
“Most people have a wish list of things they want to do when they retire, but what does life look like when you’re 80, 85 or even 90 years old?” Gibson said. “Do you see yourself still traveling the world? Are you living at home with family or with a caretaker?”
Think about how you want to spend your time, not just in the early years of your retirement, but 20 years into it and beyond.
“Create a savings strategy that supports your dreams,” Gibson said. “The earlier you begin the process, the more time your money has to grow, but there is still value in maximizing retirement plan contributions and taking advantage of your company’s match, even in the ninth inning.”
2. Add a Source of Guaranteed Income
Products like annuities can help ensure you have a source of income throughout your retired life.
“For those closest to retirement age like baby boomers, preparing for retirement may feel like a race against the clock — but you still have time to protect your future,” Gibson said. “Adding a source of guaranteed lifetime income to your retirement planning strategy protects your future by providing income that cannot be outlived. By converting your retirement savings into an annuity with guaranteed payments, you are creating an additional source of income that will last all through your golden years.”
3. Get Expert Advice
Planning for a lengthy retirement is easier to do when you have a financial expert on your side.
“Whether you take advantage of financial advice offered by your employer or work with an advice team through a reputable outside firm, getting advice from a trusted licensed financial advisor or professional as part of your retirement planning can improve retirement outcomes and readiness,” Gibson said, “and can help at every stage of your retirement planning journey.”
Caitlyn Moorhead contributed to the reporting for this article.
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This article originally appeared on GOBankingRates.com: The Retirement Time Bomb Boomers Are Ignoring
