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According to the Census Bureau's projections, the number of Americans aged 100 or older is set to more than quadruple over the next three decades. While this demographic shift is undoubtedly a triumph of medical advancements and improved quality of life, it comes with significant financial implications.
As we navigate this "Longevity Revolution," it becomes imperative to rethink traditional retirement plans and societal structures to ensure the well-being of people in their extended golden years.
But first, let's dive into the data behind how much it could cost you.
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How much living to 100 will really cost you
The Longevity Revolution is upon us, with projections indicating that the centenarian population (people who are aged 100 or older) in the United States will grow from 101,000 today to a staggering 422,000 by 2054.
Living to 100 requires a robust financial cushion to fund retirement spending that includes additional healthcare expenses, long-term care, and potential daily living cost increases. With about 62 million seniors in the U.S. today, constituting 18% of the population, this number is expected to climb to 84 million, or 23% of the population, in the next three decades.
This extended life span comes with a significant financial burden, as most people have been preparing for retirement with the typical average retirement time frame in mind. Traditional retirement plans, often designed to last 20 years, may fall short when individuals are faced with the possibility of living to 80, 85, 95, or even 100. Many could run out of money.
If the average person in the U.S. spends $63,000 per year in retirement, here is what it could cost you:
- Living an extra 10 years: $630,000
- Living an extra 15 years: $945,000
- Living an extra 20 years: $1.26 million
- Living an extra 25 years: $1.575 million
These amounts are before factoring in the potential cost of living increases that could add up over a few decades. Financial advisors now recommend planning for 30, 40, or more years in retirement to navigate the financial challenges associated with this "Longevity Revolution."
How you can grow your retirement savings to best prepare
Of course, one of the best strategies is investing in your future as early as you can. Even if it is a small amount each month, putting money away in a retirement savings or investment account can help you build a better future for yourself in retirement.
Whether you’re a millennial, Gen Zer, Gen Xer, or have retirement on the horizon soon, investing in defined contribution plans specifically geared for retirement creates an additional layer of protection. This includes plans such as a 401(k).
Ultimately, it may be very important for you to consult with a financial advisor to help you properly prepare for your own unique retirement situation.
Why we can't rely on Social Security alone
There are a lot of potential roadblocks outside of how much money you've saved and how fast you can build wealth when you're looking at potentially living longer than expected. For example, assisted living homes are poised to become increasingly vital as Americans live longer, absorbing a significant portion of seniors' Social Security and retirement income.
The cost of assisted living, coupled with potential housing instability and medical expenses, paints a challenging picture. Additionally, you'll likely be faced with societal costs, including flooded emergency rooms, unaddressed chronic conditions, and housing market instability. This can all add up even more than we think right now.
Moreover, the Social Security Administration is not designed to financially support Americans in retirement up to age 100, necessitating a reevaluation of societal structures and potential shifts in the job market.
Social Security, the government plan that millions of Americans rely on for the majority of their income in retirement will likely need an overhaul if people start living significantly longer. Social Security’s viability for the next generations has long been in question, and younger generations touted to live longer will only put more strain on the vital program.
Bottom line
The rise in the number of people living to 100 signifies a personal triumph and a societal call to action. As individuals prepare for extended golden years, stress-testing retirement plans, proactive financial planning, and rethinking societal support systems become crucial.
The "Longevity Revolution" demands a shift in perspective, prompting us to reconsider how we integrate and support our senior citizens to better the entire community. More people than ever are living longer than ever, and it’s time to prepare.
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