When people speak about the increasing age expectancies, they generally do so with positive connotation. This author agrees-there's nothing wrong with living longer, especially if we can sustain our quality of life at each period throughout our lifespan. The problem, then, is not that we are living longer-it's that we are not planning for it.

When our social security system first began making payments in 1940, the average length of collection was 8 years. The present average collection period is 18 years. Furthermore, in the 1950s, there were more than 10 workers for each retiree. Within the next decade, that ratio will drop to 2:1, which will be mathematically unsustainable under our current system. Social security was never designed to be a pension. Its intention was to provide insurance against poverty for the elderly. And yet, the current average retirement age is 'coincidentally' the same age that we may first begin receiving social security-age 62. Seems like we're using it the wrong way!

A Scenario: Healthy male, age 50, loves his job and wants to work until 75. He confidently feels he will live to 100, and he may! What does he need to do to maintain his current lifestyle throughout his 25 years of retirement?

Well, if he presently spends $40,000/year, at 3% inflation he'll need $83,000/year at age 75 and $175,000/year by the time he reaches age 100. In total, he'll spend about $3 million during the course of his 25 year retirement.

To accomplish this without risk to principal, he'll need about $1.8 million by the time he reaches retirement, and to do that, assuming he has yet to start saving, he would need to invest, at 9% net interest, $21,250 per year for the next 25 years.

Had he started saving when he was 30, his annual required savings would have been $3,422, a difference of over 600%. So the question is, have you started saving?

? 2005 Matthew S. Clement, All rights reserved

Matthew S. Clement is a financial planner and investment advisor representative with Financial Network Investment Corporation, member SIPC. He provides holistic wealth management and retirement planning to individuals and businesses. He can be reached in New York at (845) 942-8578, or by email: ClementM@FinancialNetwork.com