Do You Suffer From A Longevity Disconnect?

They say that age is just a number. For the 10,000 who reach retirement age every day, however, that number may come with a multitude of questions about whether they have done enough to prepare for retirement. The good news is that Americans today are living longer than previous generations. But too many of us don't realize that this boost in lifespan means we need to fund a retirement that could last for 20 or 30 years. This is what's known as the longevity disconnect. Calculating how much you need to save for retirement is even more difficult if you don't realize how long retirement can be. What concerns Americans the most? One of the biggest worries Americans have when it comes to retirement is outliving their money, according to a plan participant survey by Prudential Retirement. A substantial 71 percent of survey respondents fear they may not have sufficient income for their retirement years. Only one in five are highly confident they will have enough to last a lifetime. "Today we have more financial information, education and planning tools available to us than ever before," says Christine Marcks, president of Prudential Retirement. "But despite the steady drumbeat of headlines about retirement planning, we're still not getting it right." Why are people having a hard time saving for retirement? Why are they actually saving less when they need to save more? Blame our brains The answer to those questions may surprise you. Research shows the reason could lie in how our brains are wired to respond to the environment. Humans are conditioned to focus on survival in the here and now. Yet, our contemporary life demands that we plan for multiple scenarios and contingencies, often with effects that could shape our lives far into the future. Behavioral researchers have found that people actually perceive their future selves as strangers, and many find it difficult to understand the financial needs that "stranger" will have in his or her lifetime. That's one reason why saving for many years ahead is difficult for us. This and further research from Prudential shows us there are five inherent behavioral biases that make us our own worst enemies when it comes to saving for retirement. - Not being aware of increasing life spans (longevity disconnect) - Putting off difficult or time-consuming tasks (procrastination) - Thinking that bad things only happen to other people (optimism bias) - Making decisions based on what other people are doing (herd mentality) - Putting today's wants ahead of tomorrow's needs (instant gratification) Smart planning For older Americans approaching retirement, the greatest advice comes from the people who know best: those already in retirement. Many retirees agree that, if they had to do it again, they would take advantage of everything available through their employers. Other advice includes maximizing contributions to your workplace-based retirement plan or IRA, and taking advantage of IRS-allowed catch-up contributions if you're 50 or older. Retirees also suggest that those approaching retirement assess all the ways they spend money today, and avoid impulse purchases or peer pressure. Careful planning now can help you to achieve your goals of a secure and fulfilling retirement and make it last a lifetime.