If you are 65 years old today and retired or contemplating retirement, the odds are 1-1 that you'll live to be 85 -- an even bet. If I were playing the ponies, I'd take that bet.
But Jerry Miccolis, chief investment officer at Brinton Eaton and an actuary, says that many aging boomers faced with odds that are even better than that are betting against longevity. He predicts that as they get deeper into retirement, they are going to be sorry.
When you focus on retirement planning, "You better assume that you are going to live well into your 90s," he says.
And if you are part of a 65-year-old married couple, the chances are one in four that one of you will live to be at least 97, he calculates.
Living that long in retirement is expensive because even if inflation stays at the historical level of 3 percent, the cost of almost everything will double in 24 years. Think about it. If you are living on $50,000 in 2010, by 2034, you'll need to find $100,000 just to pay the same bills. At that rate, unless we're careful, the only retirement plan most of us are going to be able to afford is beans, a rocker on the porch and a big stack of crossword puzzles.
Miccolis believes that given these odds, the biggest retirement planning error most people make is investing too conservatively -- both before retirement and after.
"Bonds and cash will not provide you with protection against inflation," he says. "And for most people, the biggest threat to a comfortable retirement is inflation -- not short-term market volatility."
Investment diversity is Miccolis' mantra. That includes investing in stocks, real estate, commodities, managed futures, plus some safe havens like bonds.
Frankly, thinking about that level of risk gives me indigestion, but if he's right, a bad case of the nerves is a small price to pay for long-term security.
Financial journalist Jennie L. Phipps writes about retirement planning from the viewpoint of a baby boomer who is as concerned about retirement issues as most others of her generation.