Father’s Day: Thinking About Financial Planning for Our Dads
Father’s Day is Sunday, June 15. It’s a day to both celebrate being a father and to appreciate all the sacrifices our fathers have made for us. Father’s Day becomes even more poignant when we consider how quickly the American population is aging. In 2000, the number of Americans aged 65-plus represented 12.4% of the population. By 2030, that figure will rise to 19%. In that same year, there will be roughly 72.1 million older people in the U.S., more than double their number in 2000.
These predictions raise the question of how our nation will afford to care for these older Americans. Both as a society and as individuals, we need to put serious thought into planning for this huge demographic shift.
Here are three things to consider about our fathers’ finances as they get older:
- As their careers come to an end and they move into retirement, our fathers are going to need steady income for many years, even decades. This is especially true now that medical advances and reduced crime are allowing people to live longer. For example, a child born in 2009 can expect to live to almost 80. (U.S.A Today recently took a look at life expectancy worldwide.) Our fathers need retirement plans and smart financial products that both provide a reliable flow of income and help guarantee that they won’t outlive their savings.
- The good news is that the U.S. population of younger people is also expected to grow. Census data indicates that the number of Americans aged 15 to 64 is expected to rise 42 percent between 2000 and 2050. This is beneficial for our fathers because a larger cohort of working-age people will be able to better support our older citizens. (Nan Astone discusses this often overlooked development on the MetroTrends blog.) But this also means that these workers may have to prepare themselves for less take-home pay. Whether it’s through higher taxes or individual decision-making, this group will likely be funding the retirement plans for tens of millions of senior citizens for decades to come.
- While the U.S. spends more money on healthcare than any other nation – approximately 18% of GDP – the rise in healthcare costs actually slowed recently. As Noam Levy pointed out in the L.A. Times in January, healthcare spending rose less than 4% in 2012, versus 2.2% growth for the overall economy. This underscores the point that while it’s almost impossible to predict exactly how much healthcare costs will rise in the future, they almost certainly will. Any retirement planning for our fathers must take into account this very important expenditure. In short, a retirement plan that does not include strategies for growing assets (not just protecting them) is a plan that’s woefully incomplete.