Quality versus Quantity
A 2007 survey of a group of Americans aged 45 to
80 conducted by the Society of Actuaries (SOA)
with the assistance of Greenwald & Associates
Inc. and the Employee Benefit Research Institute
(EBRI) identified concerns about the risks associated with retirement, as well as the experiences
of those who were retired. (The study, below left,
was the fourth in a series of similar surveys that
have been undertaken every two years since 2001.)
A little more than half of the retirees in the
study anticipated the first and second stages as
defined above, while a greater majority expected
to experience the third stage. During this third
stage, the retirees generally expected to need
some form of assistance in dealing with functional
limitations. Many expected to rely on family or
communities for assistance. They also anticipated
they might need to modify their home to improve
accessibility. Half those anticipating this third
stage believed that they would spend some time
in a nursing home.
One of the most interesting findings in another
analysis on health expectancy that was presented
at the SOA’s 2008 Living to 100 Symposium was
that although women (as expected) have longer
total life expectancies, their healthy life expectancies are essentially the same as those of men. The
additional life expectancies of the females are almost entirely spent in either in the second or third
stages of retirement.
A look at the experience of other countries
is instructive in this area. Analysis of the health
status of Japanese who are older than 80 indicates that an increasing
percentage of this population
is disabled. As detailed in
an OECD (Organization for
Economic Cooperation and
Development) report on disability trends throughout the
world, the proportion of individuals over age 80 in Japan
reporting inability to perform
at least one activity of daily
living has increased from 14
percent in 1995 to 24 percent
in 2004. Japan, a country with
some of the highest life expectancies in the world, has
actually reported increasing
rates of severe disability in
its 65-and-older population,
as well.
It’s up to you
to determine if
that percentage
of preretirement
income will be
adequate for
a comfortable
retirement. And,
if necessary,
it’s up to
you to make
adjustments.
$225,000 for a couple retiring in 2008 (according
to Fidelity Investments). That leaves the average
U.S. retiree relying on Social Security to pay for
food, housing, leisure, and any other expenses.
Retirement planning clearly needs to start
when you land your first job. Planning at that time
can be as simple as setting aside money in one of
several available retirement savings vehicles. As
you age, you need to develop a more detailed
analysis of your savings goals, taking into account
your current assets and planned contributions
until retirement. You will need to determine the
percentage of preretirement income that you
can count on in retirement from Social Security,
savings, 401(k), individual retirement accounts
(IRAs), and any other income sources.
It’s up to you to determine if that percentage
of preretirement income will be adequate for a
comfortable retirement. And, if necessary, it’s up
to you to make adjustments.
A 200
SoA stud
define
thre
separa
stages
retireme
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