Episode #67: What Financial Demographics Can Tell Us

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Today’s Smart Money Question:

Financial demographics and statistics are confusing, but they provide insight into financial planning. Find out what the data says about retirement today.

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(Click the featured times below to jump forward in the episode)

Here Are Just A Handful Of Things You’ll Learn:

1:23 – Financial Demographics:  Baby Boomers Are Aging. 

  • By 2030, folks over the age of 65 will make up more than 20 percent of the population. On the surface, this statistic looks ominous. We’re living longer, and that doesn’t come without challenges. More and more people are withdrawing from Medicare and Social Security, and many folks are fearful of what will happen to these programs in the future. However, younger generations are catching up in size and entering into their working years. This means they will be able to continue to fund Social Security. While these government programs could look different, they will continue to serve retirees. Longevity is a gift, but it presents us with a unique set of societal challenges we’ll have to solve moving forward.

6:13 – Financial Demographics: As You Age, So Does Your Life Expectancy. 

  • A 65 year old male can expect to live until age 83. However, if you make it to 75, your life expectancy jumps to 86. The same is true of females. If you make it to 75 as a woman, you can expect to live until the age of 88. The idea is if you’re healthy, you’re going to live longer. The longer you live, the longer you can expect to live. See our last point; longevity presents unique challenges. It’s impossible to say for sure how long you’ll live, and your life expectancy will shift as you age. Therefore, you must take these factors into consideration as you plan. You don’t want to run out of money before you make your grand exit from this life.

14:08 – Financial Demographics: Diversify Your Income. 

  • Folks over the age of 65 generate income in a number of ways. Social Security accounts for 37 percent of their income. Income from a job represents about 30 percent. Pensions make up about 19 percent, and savings and investments account for 11 percent of their income. Don’t get lost in the data, and take note that about a third of the income shown here is coming from Social Security. That’s a heavy dependence on Uncle Sam. Therefore, it’s worth incorporating Social Security planning into your overall retirement plan. It’s also telling that only 11 percent of our income is coming from our savings and investments. As you seek to leverage your investments, develop a strategy that will enable you to generate more income from your assets. Part of this strategy should include tax planning. After all, the more you save in taxes, the more you get to keep in your pocket. Remember, it’s crucial you work to generate multiple income streams.

Other Smart Money Points: 

  • [9:17] – We’re More Active In Retirement, And Setting World Records.
  • 10:46 – Retirement Is More Than Sweet Tea And Rocking Chairs.

The Answer:

We're living longer, and we need to plan for longevity. Leverage your investments, Social Security, pensions, and other assets into creating multiple income streams in retirement. - Smart Money Questions
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