The increase in the length of our lives raises the question of how to finance those added years.
By AARON KATSMANPhillip and Dorothy Grossman, the oldest couple to make aliya.(photo credit: Sasson Tiram; courtesy of Nefesh B’Nefesh)
Due to advances in medical care and a focus on living a healthier lifestyle, exercising and eating properly, we are all living longer. In fact, since the 1950s, the average lifespan has increased by over 10 years. However, this increase in the length of our lives raises the question of how to finance those added years.In the past, financial planners would assume that the average person would retire at age 65 and then generate income from his investments to last another 10 years. Today, planners have to work out how clients can make ends meet for at least 20 to 30 years after retirement, which is no easy task.According to estimates made by the American Academy of Actuaries, a 65-year-old man has about one-in-five odds of living to age 90 – about six years longer than his life expectancy.A 65-year-old woman has almost one-in-three odds of living to age 90 – four years longer than her life expectancy. And a 65-year-old couple has a 45 percent chance – almost 50-50 – that one of them will survive to age 90.Caring For OthersThis increased lifespan does not only affect our own generation, but also that of our parents, meaning that we may well need to help finance their later years. As long-term care and medical costs spiral upward in the United States, more and more Jewish parents are moving to Israel to take advantage of lower medical expenses.While this has many positive aspects for the family, such as grandparents being able to watch their grandchildren grow up and grandchildren knowing and learning from their grandparents, the children are unfortunately often unprepared for the ensuing financial burden that will be thrust upon them.Make OrderTime is of the essence. It is vital to start saving as much and as soon as possible to ensure that we can fund our own retirement, as well as potentially helping to support our parents. This means properly managing current expenses and trying to rein in any extraneous spending.The way to start is to figure out your short- and long-term needs. Do you have children or grandchildren to marry off? Are your elderly parents in need of care? How much income will you need to supplement your existing Bituach Leumi, Social Security or other pension fund to meet fixed expenses? The next step after this is to speak with a financial adviser. When picking an adviser, it is important to choose someone who will tell you the truth, rather than a person who will tell you what you want to hear. At the end of the day, if the adviser makes you feel good but you end up running out of money because you didn’t take the necessary steps, you are going to be in trouble. An adviser should also be used as a sounding board. He can tell you if your goals are realistic; if not, you can work together to come up with goals that can be achieved.
Invest AccordinglyOnce you have defined your goals, speak to your adviser about setting up a well-diversified investment portfolio that will help achieve them. Annual portfolio reviews should take place to ensure that current investments keep you on track to meet your goals and allow for any changes in your objectives.For example, a young investor will probably begin investing for longer-term goals such as buying a house, marrying off his children and retirement. The majority of his portfolio will likely be in stocks and stock funds, as history shows that they have offered the best potential for growth over time, even though they have also experienced the widest short-term fluctuations. As the investor ages and gets closer to each goal, he will want to revisit his portfolio to rebalance assets as his financial needs warrant.We are living longer. The best thing would be to use the extra years to enjoy ourselves, rather than having to worry about how we will afford it.The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc., or its affiliates.aaron@lighthousecapital.co.il Aaron Katsman is a licensed financial professional in Israel and the United States who helps people with US investment accounts. He is the author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing.
