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Lifespans Are Increasing Faster Than Retirement Savings

Posted by Metals Corporate on

Lifespans Are Increasing Faster Than Retirement Savings
By John McDonald

Every five years, something interesting happens:  Average life expectancy grows by about one year. This astonishing fact, which has been happening since the late 1940s, with an equally astonishing result:  For babies born in the United States in 2007, it is expected that at least half of them will still be alive at age 104!

Expanding life expectancy is a testament to the power of cleaner living and vastly improved medical technology.  But one thing that has not kept pace with the ever-extending life expectancy in America and worldwide is financial preparation for retirement.

Americans are broadly programmed to believe that age 65 is the age at which a person should have retired.  This notion, wildly outdated and wholly inconsistent with current patterns of life expectancy, was aggressively propagated by the United States government and the Social Security Administration beginning in the 1930s when Social Security was created in connection with President Franklin Roosevelt’s “New Deal” package of legislation.

To the government in the 1930s, 65 was a very safe age at which to train the public to plan to begin receiving Social Security benefits.  At the time, barely half of men and only about 60% of women would ever reach age 65 at all. Among those who did, the average life expectancy thereafter would be around 13 years.  These stats meant that around half or more of all taxpayers who paid into the system would never receive any benefits at all, and those who did would receive those benefits for a relatively short period of time.

But things are very, very different now.  Instead of only half of American men reaching age 65, now nearly all of them do (roughly 82% according to the World Bank).  For American women, survival until at least 65 is even higher, at 89%.

Americans are living longer… substantially longer.  Yet, there’s been no societal shift away from the astoundingly out-of-date notion that 65 should be the age of retirement.  Even worse, there’s been no shift away from the clearly inadequate notion that government should be the provider of one’s income during retirement.

The net result of the collision of longer life expectancies without commensurate changes to retirement financial planning is rather ominous:  The World Economic Forum estimates that, on average, American men should expect to outlive their retirement savings by eight years and American women should expect to outlive their retirement savings by 10 years or more.

This brewing crisis is wholly unnecessary.  Even with a conservative portfolio consisting of a base of precious metals along with a collection of high-quality bonds, most Americans can put themselves in a much stronger position for retirement.  The question is: Will they do it?

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