I attended a convention last week, the theme of which was “The New Normal.” While there were many excellent presentations, the one I will touch on today was titled “The Longevity Revolution”, in which the speaker discussed how the increased length of retirement necessitates changing the way we plan for it.
We are living longer and, in many instances, retiring sooner. That, coupled with the fact that very few non-governmental employees are covered by a defined benefit pension plan, is requiring our personal nest egg to last longer and provide a larger percentage of our retirement income.
The speaker emphasized the need to educate the populous of these megatrends, lest they wind up as a greeter at Wal-Mart. However, it is my contention that more than education is needed. Action is the absolute necessary ingredient.
Education without action won’t do the trick. You may understand compound interest, but unless you put a plan into effect (preferably at an early age), it doesn’t matter.
However, action without education can work. For example, a financially unsophisticated worker who enrolls in his company’s 401(k) plan at an early age has the potential to wind up with a more successful retirement than a CPA who neglects to participate.
The same holds true for life insurance. Those who procure whole life while in their 20s and 30s will have a solid base of coverage in retirement, often without a premium, as the policy equity can pay for it. I’m aware of the argument that life insurance is not necessary in retirement, but my marriage vow said to care for until death do us part, not until retirement.
As with saving and investing, the problem with life insurance usually isn’t education. Most people are aware that life insurance is more expensive at older ages. It’s just that it usually isn’t a priority when we are young, which creates the typical Catch-22 scenario.
I could cite all the statistics about how much life expectancy has increased, but another session at the convention talked about how people tend to remember stories much more than statistics, so I won’t bore you, although I will mention that life expectancy at age 65 is up 25% just since social security was enacted.
But I don’t even have to tell stories, because you see them all around you. We all know people who are facing a very uncertain retirement, sometimes as a result of saving too little too late, but also sometimes due to circumstances beyond their immediate control, such as job loss or illness.
So what are you doing to prepare for the new normal? If you’re over 50 and really haven’t started yet, it’s not too late, although it will probably take a Herculean effort on your part.
If you have kids and/or clients, it is incumbent upon you to not just educate them, but to persuade, motivate, prod, cajole, influence, wheedle, urge, entice, inveigle, or charm them to action. Because the new normal shouldn’t be flipping burgers in retirement.