11 things to know about investing in 2011 — #9 Understand where you are in the lifecycle

9. Understand where you are in the lifecycle. A single 20-something with 50 working years ahead of her can be saving less and tolerating more risk than a 50-something with less than 20 years of work ahead. Where in the spectrum are you?

This question has a couple of implications for retirement planning. The first has to do with risk tolerance (see #7), which often varies with age.

The second has to do with longevity. According to the Employee Benefit Research Institute, 64 percent of Americans in the two lowest income levels will run short of savings after 10 years in retirement. Since the average life expectancy for a man is currently about 75 years (and about 80 years for a woman), this poses some significant challenges. And since this is only an average, half of the population will live longer—and sometimes significantly longer—than this.

If you are likely to live for 20 to 30 years after retirement, saving early, taking advantage of all employer matches, and delaying retirement may take on even greater importance. After all, depending on when you enter the workforce, you could easily spend 20-25% of your life retired. This means that you have relatively few years to accumulate enough savings to provide for the last quarter of your life. Taking advantage of these strategies increase your chances of meeting those goals.


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