The Growing Cost Of Living Longer

By on May 10, 2015
cost of living longer

The Growing Cost Of Living Longer

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We live in an era of longer lives. In fact, we know that since we began tracking such things humans have increased their life expectancy by three months for each passing year. In the 1840s a woman’s life expectancy in the United States was 45 years. Today it is 83 years. But the cost of living longer may be the catch for all of us. For how do we plan our finances to last for our retirement if we keep living longer lives?

Is The Cost Of Living Longer Too High?

The truth is, we can’t ever truly know how long we will live. But since we do know that the average life expectancy has been growing each year, we can expect to live longer than our parents or grandparents. It used to be that when a person retired, they expected to live five or ten years of quiet life. Now we see seniors in their 70s taking yoga classes, hiking nearby mountains or even starting up new businesses. So how does anyone plan for retirement when we can’t predict how long we will live? Can we even afford to live as long as we many end up living? What do we do when we outlive our retirement plans?

Insuring Against The High Cost Of Living Longer

That is why some financial advisors are telling their clients to think differently about how they plan for their retirement. If the cost of living longer is going up, we need to insure against that cost. In the same way that you insure your home against the cost of fire, not whether you will have one but what it will cost you when you do, we can insure ourselves against the high cost of living longer. Private annuities are turning out to be a good investment, and the younger you are when you take one out the lower the annual payment. That is because an annuity continues your payments until your death, regardless of how long you live. So there is no fear of outliving your retirement fund with this type of financial investment. Some employers offer defined benefit pension plans that work the same way. It may not be the right fit for you, but it is an option that more and more young families are considering. A baby born today could easily live to be 100 years old. Is that child going to be able to afford to live that long?