Hoping to Join the Centenarians Club One Day?

by: Smith and Howard Wealth Management

We wanted to do an article on the rising population of Centenarians in the United States. Being the eldest member on the SHWM team I was graciously elected, as if this distinction made me an expert. I will say the research was interesting. Just eating yogurt is not the reason people live beyond age 100.

A study by Boston University School of Medicine put it best in their New England Centenarian Study. It’s not “the older you get, the sicker you get” but rather “the older you get, the healthier you’ve been.” This does not only mean physically but mentally as well. According to the study, in 2010 there were about 80,000 individuals who reached or surpassed the grand age of 100. Overwhelmingly, women made up the largest percentage of this group at 85%. It has gotten a little better for men if we rely on a 2013 U.S. News/Money article which states women are now only 83% of this group. Most Centenarians live in urban areas of the U.S.

Theories of why people reach and pass the centennial mark are many – with a healthy diet and a positive outlook being at the top of the list. The Boston University study mentioned above identified some commonalities among centenarians such as: few were obese, smoking was rare and they handle stress better than most. Also their genetic make-up played a strong role, as many had parents or grandparents that reached a very old age. Factors that did not appear to play a significant role were education, socio-economic status or race.

An article in Forbes by Lynn Peters Alder (7 Life Secrets of Centenarians) stated that one in 26 baby boomers will reach the age of 100. While the odds are that few of us will become a Centenarian, many of us will reach age 85, 90 or even 95. This means once we retire we could still live for 20, 30, 35 years or more. How do we pay for this? The place to start is with a strategy. Below are some ideas you may have heard before but they make sense and are worth revisiting.

  • Start saving early. Pay yourself first before paying others. I was recently at a retirement planning workshop and again I heard a financial planner say people need to save 10 to 12 percent of their earnings for their retirement years. Rules of thumb may not work. You need a plan specific to you and your specific goals.
  • Pick a financial advisor you trust and can work with over the years. You are looking for a professional relationship not someone who only does transactions for you.
  • Do you really need that fancy latte or can a cheaper cup of coffee work? Learning to spend smart and foregoing some things can add up. And it really will not cramp your lifestyle.
  • Create and stick to a budget. How many of us monitor what we eat and how much we exercise? Paying attention to these things benefits our health and keeps us on track with a goal. A budget can do the same thing for your finances by helping to live below your means.

Once you have your budget and are saving, are you saving smart? Here are some tips to help maximize what goes into your pocket:

  • Use retirement savings plans to your advantage. A traditional 401(k) retirement plan will allow you to defer taxes until you start taking money out. For 2015 the Federal limit on 401(k) deferrals is $18,000 with an additional $6,000 catch-up for those over the age of 50. Also, check to see if your plan has an employer match.
  • Add tax diversification to your retirement plan. If you feel you will be in a higher tax bracket when you retire compared to your current income tax rate, consider the Roth 401(k) option if available in your employer’s retirement plan. In a traditional 401(k) plan, contributions are made before taxes are taken and the investment grows tax deferred. Once you take money out of the plan you pay taxes. With a Roth 401(k) option, contributions are made after taxes are paid. The growth of the investment is tax free and when you take the money out it is also tax free.
  • Minimize fees. Simply put, the less you pay in fees the more you keep. Hiring an advisor may seem counterproductive to this but a good advisor can help you by identifying investments with lower internal expenses while still providing the potential for competitive growth. Plus, an advisor can help during rocky markets by avoiding the urge to sell in rough times (selling low) and getting back in when things have stabilized (buying high). That can be a huge savings in itself.
  • Maximize Social Security. There is a great debate if Social Security will be around in the future, and if so, in what form. Not making any predictions for the future of this benefit, let’s just assume it will be here in some form. You want to maximize what you get and there are some options here. The monthly amount differs greatly from when one can first take the benefit (age 62) to waiting until the maximum waiting period (age 70) and the total amount you receive can be a significant amount. If you think you will be in the Centenarian Club or come close to it, holding off before taking Social Security may be a wise decision.

Apparently there’s more to reaching Centenarian status than eating yogurt. Remember the Dannon television commercials some years ago where people as old as 150 or more were shown? Well that wasn’t quite accurate. The people in the commercials were in the Russian Caucasus region where, truth be known, people would take on the name and identities of their parents, aunts or uncles. The oldest verified person died in 1997 at the amazing age of 122. Still a respectable age if you can afford it.

As wealth managers and “Your Family’s CFO”, we help you prepare to possibly join this small but growing group. Please contact me at [email protected] with questions or if we can be of service.