Planning for Longevity: Why You Might Need to Save More Than You Think

It's 5:30 PM on a Wednesday. You've just wrapped up another long day of work. As you sit in rush hour traffic on I-5, your mind wanders to thoughts of retirement. The tranquility of Puget Sound, weekends free from email notifications, maybe even that trip to Olympic National Park you've been postponing for years. It sounds perfect, doesn't it?

But then reality sets in. How many years will that retirement last? Will your pension and savings be enough to turn those daydreams into reality? And for how long?

As a former city employee and a member of the Washington State Department of Retirement Systems (DRS), I've wrestled with these questions myself. The truth is, many dedicated public servants might need to think bigger when it comes to retirement savings goals. Let's explore why planning for longevity is crucial and how you can prepare for a longer, more comfortable retirement.

Living Longer Than Ever

Americans are living longer than ever before. If you reach age 65, you have a good chance of living into your 80s or beyond. According to the Social Security Administration, a 65-year-old today can expect to live, on average, until age 84 for men and 86 for women. And those are just averages - many people live well into their 90s or even past 100.

Why You Might Need More Than You Think

1. Healthcare Costs: As we age, healthcare expenses tend to increase. Fidelity estimates that an average retired couple age 65 in 2024 may need about $330,000 saved (after tax) to cover health care expenses in retirement.
2. Inflation: Even with a modest 2% annual inflation rate, the cost of goods and services could double over a 30-year retirement. Your savings need to keep pace with rising prices.
3. Lifestyle Changes: You might want to travel more, pursue new hobbies, or help your grandkids with college. These can all increase your expenses in retirement.

Your Washington State Pension: A Good Start, But Is It Enough?

If you're part of the Washington State Department of Retirement Systems, you have a valuable benefit in your pension. These pensions are inflation-adjusted, which helps protect your purchasing power over time. However, your pension alone may not be enough to maintain your desired lifestyle throughout a long retirement.

Strategies to Boost Your Retirement Savings

1. Maximize Your 457(b) Contributions: If your employer offers a 457(b) plan, try to contribute the maximum allowed. In 2024, you can contribute up to $23,000, with an additional $7,500 in catch-up contributions if you're 50 or older.
2. Consider Roth Options: If available, Roth contributions to your 457(b) or a Roth IRA can provide tax-free income in retirement, which can be especially valuable if tax rates increase in the future.
3. Diversify Your Income Sources: Don't rely solely on your pension. Look into other investment options like IRAs, taxable brokerage accounts, or real estate to create multiple income streams in retirement.

Planning for Long-Term Care

Long-term care is a significant expense that many retirees overlook. About 70% of people turning age 65 will need some type of long-term care services in their lifetimes. Consider long-term care insurance or setting aside funds specifically for this potential need.

Estimating Your Personal Life Expectancy

While averages are helpful, your personal life expectancy could be very different based on factors like:

• Family history
• Lifestyle habits (diet, exercise, smoking, etc.)
• Current health status

Online tools like the Social Security Administration's Life Expectancy Calculator can give you a rough estimate, but consider consulting with your doctor for a more personalized assessment.

The Psychology of Planning for a Long Retirement

It's natural to feel overwhelmed when thinking about funding a 30+ year retirement. But remember, planning ahead can give you peace of mind and control over your financial future. Break your planning into manageable steps and celebrate small victories along the way.

Wrapping Up

Planning for longevity is about more than just money - it's about ensuring you can enjoy a long, fulfilling retirement without financial stress. While your Washington State pension provides a solid foundation, it's crucial to build upon that base to create a comprehensive retirement plan.

Everyone's situation is unique, and retirement planning can be complex. Consider working with a financial advisor who understands the ins and outs of Washington State retirement systems. They can help you create a personalized plan that accounts for your specific needs, goals, and potential longevity.

Remember, it's never too early - or too late - to start planning for a longer retirement. Your future self will thank you for the effort you put in today.

Footnotes

1. Social Security Administration. (2023). Retirement & Survivors Benefits: Life Expectancy Calculator. https://www.ssa.gov/OACT/population/longevity.html ?
2. Fidelity. (2022). How to plan for rising health care costs. https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs ?
3. Internal Revenue Service. (2024). Retirement Topics - 457(b) Contribution Limits. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-457b-contribution-limits ?
4. Administration for Community Living. (2020). How Much Care Will You Need? https://acl.gov/ltc/basic-needs/how-much-care-will-you-need ?
5. Social Security Administration. (2023). Retirement & Survivors Benefits: Life Expectancy Calculator. https://www.ssa.gov/OACT/population/longevity.html ?

Fee-only financial planning and investment advisory services are offered through LifeFocus Financial Advisors, LLC, a registered investment advisory firm in the state of Washington.

This article content is for informational purposes only and does not constitute investment advice. The views and opinions expressed in this article are solely those of Seth Deal and do not necessarily represent the views of LifeFocus Financial Advisors, LLC.

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