The good news is that we are living much longer these days and the trend will likely only continue. In 1800, the average life expectancy at birth in the United States was just 35 years. Today, it is 78.6 years. Women typically outlive men for several years. In the United States, the life expectancy for women is 81.1 years, compared to 76.2 years for men. Several factors can affect life expectancy, including genetics, lifestyle, access to healthcare, and environmental conditions. There is so much more information these days via; books, blogs, podcasts, coaches, cooking shows, stats, charts, and the list goes on, that we can learn how to live, eat and be healthy. There are more nutritious food options, gyms, and yoga.
The bad news is that from a financial standpoint are we ready for this? Most Americans do not have enough in retirement, they are counting on Social Security and Medicare when they retire. So, if the 65-year-old retired person lives until 90 + years old do they have enough to retire comfortably? Can we even count on social security and Medicare in the future? Are we going to live the retired life we dreamed of or will we struggle to get by? I wanted to look at an average life and see what the data show.
Here is what an average person’s retirement budget looks like according to the Bureau of Labor stats:
When I went and read a bunch of blogs and articles on how much the average person has in their retirement accounts the numbers were all over the place. The numbers range from $65k to $260K and that number does not include SS and Medicare. So, let’s just assume that a person has $250K in their retirement accounts, their home is free to clear and they will receive SS and Medicare for this example. This is NOT true for everyone so your situation could be worse or better. It also looks like they receive an average of $1,700 a month in social security benefits as well.
So, let’s assume this person lives until 85 years old and we can use the monthly bills of $4k that are in the chart of this blog. The good news is for this scenario, this person has a free and clear house they can always get a reverse mortgage on to help offset lifestyle needs.
So, the quick math on this scenario is that if the monthly bills just to live are $4K per month, this person would have to tap into their house to live. $250K and social security will NOT be enough with $4K in monthly bills. What if this person did NOT have a house? Looks like they would have to work part-time just to live unless they inherit money and that could happen as well.
Let’s be honest, who wants to work their whole life to retire and have a budget of $4K to retire on, that would NOT work in so many places in the US and around the world. That is NOT a retirement budget I want and on TOP of this what if you live to be 100 years old?
The traditional way of saving for retirement is not going to be enough unless you are a BIG income earner, sell a company, inherited money, a house is worth a lot of money that you can tap into, or you had an investment go well. This is why I love cash flow and real estate as a great option for someone.
Many people are going to have to start planning differently and being more diversified as we live longer. In the future, I cannot imagine both Social Security and Medicare being around for the younger generation. They are such a massive burden on the country financially and more people every day are getting on both due to the aging population retiring at a rapid pace. Just imagine if the person in the same scenario above that I went through paid off a 4-unit property and the average rent is $1500 per unit. After expenses, you make an extra $4500 a month on this property. Real estate is one of the best vehicles that can spit out cash flow month after month. It can be passed down to future generations and has equity if someone ever needs to tap into it.
Don’t wait to plan for retirement, don’t wait to talk to your kids about it, who wants to retire on a tight budget and most importantly I want to live as long as possible to see my kids and grandkids grow up. Compound interest is the 7th wonder of the world and owning real estate that cash flows is just as amazing.