From an adviser’s perspective, it is a never-ending struggle to keep clients focused on the long term. If anything, this challenge becomes more difficult as people approach retirement.

Relentlessly increasing longevity is anything but a demographic/statistical abstraction for retiring investors. It’s the central variable in their financial lives. According to the Social Security Administration, the average life expectancy today for a 65-year-old is around 84 years for males and 87 for females. Married people tend to live even longer, with a greater than average probability of at least one spouse living to age 90.

For some time now, the average retirement age in the U.S. has been 62—and probably will continue to be unless and until the age at which people can claim early Social Security retirement benefits changes. Living just to the average still means an almost 30-year retirement.

Clients turning 62 this year happened to have been born in 1962. To help place the benefits of long-term investing in a better perspective for them, we ask these three questions:

*Where did the S&P 500 end in 2023, relative to where it closed in 1962?

*Something that’s critically important to the client in or close to retirement: How much did the index pay in dividends last year versus 1962?

*And how did mainstream stocks perform in relation to inflation—which, in a two-person, almost three-decade retirement, is going to be what matters most?

The answers:

*The S&P 500 closed in 1962 at 69. On Dec. 31, 2023, it ended at 4,769.

*The S&P cash dividend in 1962 was $2.15. For the full year 2023, it was a record $70.30.

*The consumer price index ended 1962 at 30. In December 2023, it was 279.

Thus, the scorecard in round numbers since 1962: S&P 500 rose by a multiple of 69; dividends rose by a multiple of 32, and the CPI rose by a multiple of 9.

I think you'll find that this makes the point about as directly and dramatically as it can be made. Namely, for your entire lives, mainstream stocks have been both the simplest and most effortless way for you to build real wealth and increase your income over time at a far greater rate than inflation can take it away.

Here are some of the most common adjustments investors have to make around retirement.

First, becoming eligible for Medicare at age 65 certainly helps make health care planning easier. It can also help lower out-of-pocket spending on many health care expenses. However, most are unaware that Medicare won’t pay anything for perhaps the biggest health care expense you may have to face in retirement: long-term health care.

So, you’ll need to have a plan in place for these costs, and if you opt for a Medicare supplemental policy, you’ll still have premiums and deductibles for all your regular care.

Next, the biggest surprise for many is that they’ll likely still need a good chunk of that retirement money remaining invested in the stock market. This can be hard to grasp for those who have been taught to believe the so-called conventional wisdom that “you must be very conservative with your funds when you’re retired in order to be safe.”

To help you at least keep up with inflation and, in my experience, improve the likelihood of maintaining your standard of living throughout your retirement, I strongly believe you need to retain exposure to growth. And that means keeping or placing a good portion of your retirement assets in the stock market.

This need for long-term growth is why we recommend using a strategy of asset allocation to meet both the timing and duration of your various goals. There is never any one investment that can meet all your different needs. It’s all about the timing of your needs and goals that will help create the best mix of investments for you.

With stocks, there’s a very real possibility that investors have to suffer the occasional long periods of minimal, if not negative, returns. Furthermore, you also need the growth that comes from your stock investments in order to fight the hidden tax that never shows on any statements—inflation. Historically, inflation has caused prices to rise by about 3% per year.

Think total-return—growth plus your dividend income. Save more than you think you'll need, and don't be too conservative in your investments … except for money needed for a specific purpose within three years. That should be very conservatively invested. Your growth can be thought of as building or adding to future income.

No matter how much you plan, retirement will find a way to surprise you; that’s just a fact of life. Hopefully, the planning you do will help mitigate any potential large downsides from those surprises while helping you enjoy the pleasant ones.

For instance, following the 2008 market drop—a nasty surprise for most of us—many people swore off the stock market forever. People began to believe—and many still do—that the market is a casino riding on a roller coaster with the odds heavily stacked against them.

Bad thinking. They’re missing the fact that markets and economies are always and forever cyclical. Some of the downturns in the cycle will just happen to feel more painful than others.

Many investors increase their own retirement risk by being overexposed to cash and other “safe assets.”

One of the biggest risks to retirees is outliving their savings once some retirement capital has been built up. While saving consistently is critical, earning a return on savings also has a substantial impact on retirement outcomes. This shows why “safe” is a misnomer.

For instance, a couple who retire at 60, with the second death at 95, will experience a near-tripling of their living costs. The income from their principal, frozen in a portfolio of fixed-income debt securities, will never cover that.

On the other hand, there has been no 30-year period in American financial history in which the cash dividends from stock failed to beat consumer inflation. Indeed, at least since 1960, dividends have grown at very nearly twice the CPI inflation rate.

Dividend growth continues to be the most easily understood, as well as the most underappreciated feature of investing. It isn't your statements of account values that you’ll be taking to the grocery store for the next 30-plus years; it's the income from the investments listed on those statements.

Historically, mainstream stocks have been the most effortless way of building real wealth net of inflation and increasing your income over time at a far greater rate than inflation takes it away.

No asset is 100% “safe” if holding it means you run out of money before your time. Often, simply getting your original investment back—even with interest—won’t cut it. Long-term capital appreciation is generally necessary to help you offset inflation and a lifetime’s worth of withdrawals.

Yes, stocks can be volatile in the short term, but this volatility evens over time, and even bear markets fade. For those with time horizons of 20 to 30 years and longer—like retirees—stocks have historically delivered the long-term growth necessary to meet the needs of most investors.

Longevity works in stocks’ favor. Historically, the longer you are in stocks, the smoother and more consistently positive returns get.

Stocks have returned 10.8% annualized annual returns since 1925, including bear markets, and have never been negative over a 20-year stretch.

I love this quote, courtesy of growth investment analyst Eddy Elfenbein, when discussing why stocks outperform bonds over time: “Equity is completely different from other classes of investments. It’s the only one that captures human ingenuity, which is the ultimate asset.”

Invest in all those human assets that have provided such great results over time. Get them working for you and let them help you to a long and positive retirement.

Michael Maehl is a retirement income specialist and Spokane-based senior vice president of Opus 111 Group LLC, a financial services company headquartered in Seattle. He can be reached at 509.944.1790.