Superannuation

Superannuation means that you live a really long time.  You become really old.  Too old.  So old that you outlive your money.  If you were born during the Hoover, Coolidge or even the Wilson administration and you are still alive, you are superannuated.  If you are a World War II veteran, you are superannuated.

Running out of money when you are really old is a real problem.  Try as best as you can to plan for it.  There are tools out there to help you, and a good Financial Planner can also be helpful.  My Business School economics professor used to tell us that our objective should be to die owing nobody and with our last remaining dollar in the bank.  While that may be taking it to an extreme, the point is that you should enjoy your life and spend what you have but no more.

Social Security Website

If you do nothing else, you should check out the Social Security Association’s website on Life Expectancy.  It’s free and it only takes a little time.  Here is a link to the website:

https://www.ssa.gov/planners/lifeexpectancy.html

Here is a quote from the website:

When you are considering when to collect retirement benefits, one important factor to take into account is how long you might live.

According to data we compiled:

  • A man reaching age 65 today can expect to live, on average, until age 84.3.
  • A woman turning age 65 today can expect to live, on average, until age 86.6.

And those are just averages. About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95.

The SSA website then gives you a calculator, wherein you input your date of birth and it calculates how long you are expected to live.  I am almost 57 and I am expected to live another 26 years.  If I make it to my full retirement age of 67, I can be expected to live another 18.3 years.  The longer you live, the longer you are expected to live thereafter.  Consider the last sentence in the quote above:  If you make it to Age 65, you have a 25% chance of making it to Age 90.

Social Security 

While many within current younger generations believe that they will never collect Social Security because the SSA will run out of money before they get old enough to collect it, I believe this is unlikely.  There will not be actual cuts in Social Security.  I believe the fix will come by increasing the annual salary maximum that is subject to Social Security tax.  The maximum for 2018 is $128,700, meaning there is no Social Security tax paid on earnings above $128,700.  As demographics become more and more unfavorable for Social Security (meaning more people are collecting and fewer people are paying in), something has to give, and I believe the tax will be raised by moving up the salary cap.  The point I am making is that one’s Social Security income will still be there even when they get really old.

Other Actions to Consider

  • Don’t File for Social Security at least until you reach your Full Retirement Age.  If you don’t know what your FRA is, that same SSA website can help you figure it out.
  • If possible, wait until after you reach Full Retirement Age to file.  If you wait 1 year after your FRA to file, your benefits will be 8% higher.  That’s a good return on a 1-year investment that will really help if you make it to 90.
  • Save More Now.  Easier said than done, but essential if you think you might live a long time.
  • Look in the mirror and reflect honestly on your own health.  If you are getting on in years but you are still very healthy, eat well, and not on a lot of medications, Congratulations!  But you may be facing a money problem when you get to be really old.
  • Your living expenses will probably tail off as you get older.  Consider how much you spend now staying active, and while you hope you will be able to continue with your activities, consider how much you really will be able to do in terms of active vacations that you pay for now.
  • If you have to go into a home, while a home may sound expensive, it is “all inclusive”, meaning you will have little in the way of outside expenses.  Planning to have enough money to move into and to afford a nice independent living or another type of facility is a really a good objective.
  • If you are a son or daughter helping your parents plan for the future, it may be best to get a financial planner involved.  Kids don’t listen to their parents, and vice versa.  A planner can be very helpful and can help preserve familial relationships.

There are a lot of other things you can do, but at least be aware of the issue of outliving your money, and become familiar with the Social Security website for tools to help in making decisions.

 

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