Mitigating Longevity Risk: 7 Strategies for a Long and Wealthy Life

mitigating longevity risk

Life is getting longer, which is an incredible blessing. It means that we get more time with our friends and family, and more time to do the things we love. However, our society isn’t really structured to support long lives, because most people are encouraged to retire around their 60s and certainly by their 70s. The problem is, this exposes people to longevity risk: the possibility that you will outlive your savings account.

Prosperity Economics™ takes a slightly different approach. We want people to stay in jobs they love (even if that looks a bit different as you age) and make decisions that actually stretch income for as long as possible. That way, you don’t have to dread the possibility of living to 120, you can just embrace it!

7 Strategies to Live Long AND Prosper

1: Work that You Love

Retiring too early truly is one of the biggest mistakes we see. If you retire at 65, You could reasonably expect to live another 35 years. Yet most people only have an income to last them about two decades’ worth of retirement.

There are also studies that suggest that when people lose their sense of purpose, their minds and bodies quickly succumb to age. Staying active and interested in what life has to offer literally keeps you young! That’s not to say that you have to keep working at the pace of a 30-year-old when you’re 70. However, it can really keep your mind sharp and your bank account afloat to find some way to meaningfully contribute.

2: Anticipate Inflation

Another drawback to retiring too early is the impact of inflation on your fixed income. Of course money is always being affected by inflation, yet you certainly feel it more when you’re living on a declining balance. Many people retire with $1 million thinking they’ll never run out of money, Yet that’s only 10 years of $100,000 income, if you think about it.

Consider how far $100,000 stretches today. Then think about 30 years from now. Is it not possible that money won’t stretch as far? Maybe you’ll have to use $200,000 to get the same impact as $100k in today’s dollars. Maybe even more. Suddenly, your 10 years of income has shrunk to five, and that’s not even considering taxes.

Inflation is a killer of your income, so you likely need to save much more than you think you need. By working longer, you also delay your need to live on a fixed income and create more savings for yourself. It just makes sense.

3: Save More Now

This may seem like a no-brainer, but the ore you save now, the better prepared you’ll be for the future. If you’re saving 10%, try for 20%. And if you’re saving 20% try aiming for 25% or even 30%. Making these simple changes now, rather than later, can really build momentum. Especially if you save into a whole life insurance policy, which grows steadily and securely within your policy. You can use it at any time, AND it has income benefits for you in retirement, too.

While you might want to start investing before you start saving, we strongly advise doing things the other way around. Saving money gives you a really firm foundation, and can put you in a better position to invest later.

4: Expand Your Portfolio

And NO, we don’t necessarily mean you should be buying stocks.

What we mean by this, is instead of trying to pay down a lot of debt (like your car or your mortgage), instead think about what you can leverage to build your asset base. Sure, you might need to save a little first, but building your asset base can be a great way to increase your cash flow and your savings. Rather than trying to funnel any excess money into your mortgage, try saving it and then using it to invest in more real estate.

5: Control Your Money

Typical financial planners will actually try to steer you away from controlling your own money. They want it in someone else’s hand, be it their own, or Wall Street’s. It may even be in the government’s control, like your 401k. While you might be happy to hand over the reins, this isn’t always in your best interest. When other people control your money, they can take unnecessary risks, not to mention all the fees associated.

By purchasing and/or investing in assets you control, you get to determine your parameters and what you’re comfortable with. Bridge loans, real estate, oil and gas, peer lending, and annuities are all good examples of assets you can control.

6: Invest in Your Health

Investing in your health isn’t just about living longer, it can also help you keep your costs down as you age. Many people experience more health changes as they age, and it can be most expensive when people are living on a fixed income. By investing in your health early, you can improve your chances of good health in the future, and hopefully, minimize expenses later in life.

What seems like an expense now, when it comes to your health, may actually be an investment for later if it keeps you from racking up medical bills later.

7: Make Your Life Insurance Multitask

If you didn’t know, whole life insurance is the perfect multi-tasking tool. Not only does it provide you with a Death Benefit that gets paid to your heirs, you also have access to some of that Death Benefit while you’re alive, in the form of Cash Value. Your cash value can be leveraged for anything you want, no questions asked, You can use it for emergencies, investments, and just for fun.

Whole life insurance also comes with the ability to add riders, which are additional benefits that improve your insurance. Riders are customizable, meaning you can create your perfect policy. One rider we recommend is long-term care, which makes it possible for you to fund your long-term care, if needed, with your life insurance policy. This can save you a lot of money by bundling them than if you paid for insurance and LTC separately.

Get Ready for a Long and Prosperous Life

Living longer is something to celebrate! Yet it’s important to prepare for a long and vibrant life financially. We’d love to connect you with a Prosperity Economics™ Advisor in our network who can help you find Prosperity today. Contact us to be put in touch.

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