Professional Insurance Blog

A common objection to retirement planning is that it is not absolutely necessary. Those who subscribe to this view opine that they could and would work as long as possible. Recent research by LIMRA revealed an apparent correlation between retirement age and life expectancy. This research would have had certain inherent limitations. However, it provides an interesting perspective on retirement. The findings indicate that the earlier one retires, the higher one’s life expectancy would be.

One reason for the correlation may be that those who continue working have to continually cope with job-related stress. One could facetiously argue that working later would reduce the years actually spent in retirement anyway. The study suggested that those who retire at age 65 could expect to live up to age 66. At the other end of the scale, those who retired at 50 could expect to live up 86. If the correlation is not a spurious one, there are perhaps several other reasons for this. The implication is that if we decide to work later, there is possibly a deadly price to pay. Other factors can impose retirement on us such as illness or death of a spouse. Unless one has a business that is on autopilot, this would severely impact one’s finances and convert golden years to copper.

The life-expectancy and retirement age correlation demonstrate one of the problems with early retirement. With early retirement one may live longer on average. However, one would either have to save more is a shorter time or put a wealth-generating system in place earlier. This would be necessary to sponsor the thirty-plus years that you may have in retirement. The average number of years to plan for retirement is generally thirty. Many retirees barely save enough to maintain their standard of living for ten years of retirement. So those who wish to retire earlier, particularly at age 50, need to keep this in mind. The good news is that the conventional retirement age of 60 has an average life expectancy of 76. Since averages factor in extremes, you should still plan for 30 due to uncertainty.

The findings of the research should confirm some of what we already know. I believe that nothing is inherently disadvantageous about working past 60, once it is voluntarily and enjoyable. Those who are forced to work due to poor retirement planning should ensure that the retirement jobs have fantastic death benefits. The research confirms the importance of not retiring earlier than usual if you really cannot afford it. Prudent planning would not assume everything would go according to plan. You should therefore also consider “what if” scenarios if you are planning properly for retirement especially.

Darrell Victor is a financial services sales professional who specialises in retirement planning and group benefits.