About 6 years ago, a little before I met John, I was feeling very frustrated with my career and work situation as a CFO. So, I did what you might expect a CPA to do, I ran the numbers. I created a spreadsheet to figure out what cash flow I needed annually to fund my expenditures and other major expenses such as daughters’ university costs and a new car. I then created a spreadsheet that forecast my income after taxes for each of my types of investments and figured out that I had enough investments to last until I was 85 after factoring in inflation and assuming I could sell the house to fund my late-in-life retirement residence/health support needs.
I felt pretty good about this. I figured that 85 was pretty old. All four grandparents were long gone before 80, in fact the oldest grandfather only made it to 60! While my parents are still alive, they were only in their early 70s at the time so I figured 85 was a good planning number.
I felt so good about it that I actually started to shift my career. I was much more deliberate about the clients I was taking on so that I could enjoy my work more because it didn’t need to be about the money. I shifted further into a new career becoming a business strategy coach because now that I didn’t need to keep the same high income. I was Financially Independent.
And then I met John… and his parents. While his Mom is no longer with us, she did manage to live until 89 and his Dad is going strong at 91 and counting! When I say going strong, I mean still active and living on his own. Last year, he drove himself to Florida in his recently purchased Jaguar!
So how exactly did he wreck my retirement plans? Well, now I had to rerun the numbers! Planning to live until 85 wasn’t enough. Now I had to plan until 95 and beyond. Unlike John, I don’t have a defined benefit pension plan so I need to rely on my retirement savings to create my own pension plan. This requires making many assumptions on things like rate of return on investments, inflation rate, and how long I will live. So, that shift in forecast life span meant I wasn’t quite ready to retire from a financial standpoint.
Problem is, I am not sure how long I really need to plan for – will 95 even be enough? What is the safe amount of investments to fund any possible anticipated life span? Fortunately, I still enjoy my work as a business strategy coach. I am able to structure my work life to give me the free time and flexibility that I want so I will continue to work as long as I enjoy the work. After that, I will just live within the income that my investments generate. It is a tricky balance when you don’t have a defined benefit pension plan. I really have no desire to leave a large inheritance for my daughters, but nor do I want to be a financial burden to them when I am older. In a perfect world I will spend my last dollar the day I die. Now if I could just figure out exactly when that would be, my financial planning would be perfect and worry free!
How do you manage planning for longevity in your retirement planning?