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Deny now, pay later
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Posted by Manisha Thakor on Jan 23, 2017 7:53:00 AM
Denying certain realities about retirement and aging today can cost you dearly tomorrow.
A headline in The Atlantic recently jumped out at me: “Self-Control Is Just Empathy With Your Future Self” (December 6, 2016).1 For me, that perfectly captured a profound truth about human beings in general—and saving for retirement in particular.
The fact is that the better you can imagine your retired self, and really feel what itʼs like to be her, the better your chance of saving for that period of life. This, of course, requires a tremendous amount of self-control.
Visualizing retirement becomes easier the closer you actually get to 67. For some people itʼs finding that first grey hair that forces the realization, “Huh, I guess I am going to be a senior one day.” Before that “Eureka!” moment comes, though, a lot of people really struggle to accept the reality of their future 70-year-old selves, much less to empathize with them. Some are sustained by the belief that the aging process will (miraculously) be bypassed altogether—that aging, disability and even death only happen to other people, so why bother preparing for old age? Itʼs safe to say these people are, as the grief counselors say, in denial.
Have you faced up to these 4 commonly denied realities?
They say we live in a post-truth era, but the best way to remedy this denial of reality is to face a few cold hard facts:
- A woman reaching age 65 today can expect to live for two more decades, until age 86.6.2
- Although working Americans expect to retire at 66, the average retirement age is actually around 62.3 So, a 25-year retirement is likely.
- About 70% of people will need some form of long-term care at some point in their lives.4
- For the first time in 130 years, more young adults live with their parents (32.1%) than with a spouse or partner (31.6%).5 This reflects certain realities about todayʼs job market, which empty-nest parents may deny at their peril.
The long-term costs of denial
Denial affects different segments in different ways—all of them significant:
For young savers: “Save early and save often” is a mantra that’s repeated for good reason. Itʼs young people who have the potential to gain the most from the benefits of early saving. To visualize the effects of compound interest over the course of several decades, think about rolling a snowball, the way it starts small and builds up into something colossal. The less time you spend in denial, the more time you have to potentially benefit from this compounding.6
For children of aging parents: If youʼre in denial about the realities of long-term care and havenʼt seriously looked at long-term disability insurance options for your parents, you may find yourself dipping into your retirement savings to cover out-of-pocket expenses for parental care.
Unfortunately, itʼs also daughters who tend to shoulder the responsibility of providing care for an ill parent in the absence of adequate professional care coverage. All this can be mitigated if you have an honest conversation with your siblings about what might happen to Mom and Dad one day, and make preparations now in anticipation. While youʼre at it, have an honest conversation with yourself about what would happen if you had to stop working due to your own disability and take necessary measures regarding insurance and savings.
For parents of adult children: Nature abhors a vacuum, and parents who donʼt acknowledge— and therefore, plan in advance for—the void left when adult children fly the nest can end up trying to fill it with retail therapy or other knee-jerk spending to numb those feelings of loss.
Denying the shift in family that will inevitably take place (you and your spouse are suddenly confronted with each other) makes marital discord a possibility. Divorce may even be the outcome—the costs of which are not only financial. Marriage counseling is something that should be on the table even before any tensions manifest, on the assumption that all transitions are difficult and talking therapy never hurts.
Another point to consider is the likelihood of adult children returning to the empty nest, which is happening at an unprecedented rate. Denial of this possibility can also hurt you financially, if the idea of supporting them into their thirties was never factored in to your overall financial plan.
Blissfully burying your head in the sand is a strategy that youʼll inevitably have to pay for down the line—often at a juncture in life where you can least afford it. So ask yourself today, "Am I saving enough to provide a livable income for myself that will last 25 years?"
Also, "Am I taking care of my body with preventive care, diet and exercise?" Failing to address the issues of extra weight or inherited diseases can invite mammoth medical bills in retirement that may quickly deplete your savings. I'm a fan of facing issues head on: Not only does it empower me right now, it also lessens my anxiety about the future.
1. Source: https://www.theatlantic.com/science/archive/2016/12/self-control-is-just-empathywith-a-future-you/509726/ , The Atlantic website, December 2016
2. Source: https://www.ssa.gov/planners/lifeexpectancy.html , Social Security Administration website, accessed January 2017
3. Source: http://www.gallup.com/poll/168707/average-retirement-age-rises.aspx , Gallup website, April 2014
4. Source: http://longtermcare.gov/the-basics/who-needs-care/ , Longtermcare.gov, accessed January 2017
5. Source: http://www.npr.org/sections/thetwo-way/2016/05/24/479327382/for-first-time-in-130-years-more-young-adults-live-with-parents-than-partners , Pew Research Center website, May 2016
6. This hypothetical example of the principle of compounding is being used for illustrative purposes only.
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