]Of course, for individuals, the prospect of a long life is great news. But it does raise a major question: Will people have enough resources to live comfortably all those years or will they outlive their money? Most people react to the possibility of a longer life span by stepping up their saving, hoping to put away enough money to cover any eventuality. But the total size of your nest egg can be misleading. As I’ll explain, it’s more useful to think in terms of the annual income your savings will generate. That makes it easier to figure whether you’ll have the means to pay the costs of a long lifetime.
What it’s like to prepare for retirement
We recently spoke with couples nearing retirement age in the United States and five other countries. Each country is different in how retirement is financed and every couple’s circumstances are unique. Yet, we found remarkable similarities in the sorts of things they hope for, what they worry about and the way they think about the next stage of their lives.
JUAN ANTONIO & YOLANDA
Juan Antonio and Yolanda live in Northern Mexico with their youngest son, who recently finished college and is looking for a job. They had to scale back on expenses to pay for private college for their children, and are both still working to rebuild their savings.
They both love what they do. He’s been in sales all his adult life and she’s spent decades teaching English and writing in elementary schools. Juan Antonio says he needs to continue working for five more years. If he retired today, his pension would amount to the equivalent of $320. Yolanda has no pension and will teach as long as possible. “We plan to save as much as we can from the extra income I could earn in another five years,” Juan Antonio explains. For now, they watch their expenses. “We must buy only what’s necessary in order to have some luxuries for Christmas and family gatherings,” Yolanda says. Juan Antonio adds: “Money – or the lack of it – is a concern as we age. I didn’t think about a retirement plan when I was younger. If I had saved the right amount of money since then, I would not be in the situation I am now.”
When they do retire, Juan Antonio and Yolanda say they’ll continue doing the work they love, though scaled back. Juan says he will give professional sales advice and Yolanda says she will continue teaching in some capacity. Both would like to travel.
JIM & LYN
Surrey, United Kingdom
Many people fear losing their jobs, but Lyn says she’s sorry she wasn’t laid off after a merger a few years ago. Now she’ll have to wait until she’s 60 before starting to collect her pension. After years on the job and no children to care for, Lyn and Jim are more than ready to move on to the next phase. They consider themselves to be very fortunate because they expect a substantial income from their workplace pensions, supplemented at 66 by state pensions—enough to keep up their standard of living and pay for a life of travel and adventure.
When asked whether she’s concerned about running out of money if they live to a very long age, Lyn says she and Jim will have the equity of their home as a backup. Jim is also confident that they will “spend more in our early years of retirement knowing full well that we will slow down in later years.” Their plan is to wait until they can pay off their mortgage and collect their retirement pay. Then there’s no shortage of things on their wish list: camping, theater, socializing, and maybe a year in Australia. Lyn says she may want to get a part time job or do charity work. “I don’t want to just retire and stop – I want to retire and take a different direction for a few years.”
“We want to enjoy life,” Jim says.