Planning for Longevity Risk in Retirement Savings

With continually rising life expectancies, longevity risk poses a major threat to retirement sustainability. As people live longer, retirement savings must stretch further to avoid depletion while still living. This growing concern requires proactive planning to align savings with longer timeframes. Failing to adequately account for longevity jeopardizes financial security in later years.

Outliving retirement savings often means significant lifestyle reductions. Once funds are exhausted, covering essential costs becomes difficult without the ability to replenish. This leads to undesirable outcomes like moving in with family, taking on debt, struggling nutrition, and foregoing healthcare. With prudent strategies, however, you can feel reassured your nest egg will stand the test of time.

Proper longevity planning involves adjusting key assumptions to match current longevity data. This includes utilizing conservative withdrawal rates, emphasizing growth-focused investing, and building flexibility into plans. Seeking guidance from financial advisors can also help strategize around personalized risks. With the right approach, your golden years can stay golden regardless of how long you live.

Understanding Longevity Risk and Why It Matters

Longevity risk refers to the danger of outliving retirement savings while still alive. With ongoing advances in healthcare and life expectancy continuing to rise, this threat keeps growing. According to the Social Security Administration, a 65-year-old man today can expect to live to 84.3 years on average. For 65-year-old women, average life expectancy is even higher at 86.7 years. With many commonly living well into their 80s, 90s and beyond, retirement funds face depletion risks over such extended timeframes.

The impact of exhausting savings in later years can be severe. Once retirement accounts are drawn down with no way to replenish, covering basic costs for housing, food, and medical care becomes a struggle. Significant lifestyle reductions often follow, such as moving in with family or scrimping on healthcare expenses just to get by. After a lifetime of saving, the inability to maintain financial security in retirement can be demoralizing. But with prudent planning, you can help protect against savings shortfalls.

Factors Impacting Longevity Risk

Many interconnected factors influence longevity risk, including:

Increasing Life Expectancy

With ongoing advances in medical care and improved lifestyle habits, average lifespans continue rising steadily. When today’s retirees were born in the late 1950s, average life expectancy was only around 70 years. Now reaching their mid-60s, they face average lifespans upward of 84-87 years. Plan durations of 30 years or more in retirement are common.

Healthcare Costs

Rising healthcare expenses in retirement strain savings. As lifespans extend, more years of medical costs must be covered. Health issues also rise with age, elevating costs further. Even with insurance, out-of-pocket health spending still impacts nest eggs.


As overall costs of living increase, retirement savings lose purchasing power over time. Even low inflation compounds significantly over lengthy retirements. COLA adjustments to Social Security help, but often don’t fully match rising costs.

Investment Volatility

If retirement begins amid a market decline, sequence of returns risk applies. Early portfolio losses impair the sustainability of withdrawals later. Significant market drops at any time also drain assets.

Withdrawal Rates

Drawing too much yearly income from savings heightens depletion risks. Sustainable rates consider portfolio returns and timeframes. Overly aggressive withdrawals jeopardize sustainability.

Planning for Longevity Risk in Retirement Savings

Key Strategies to Mitigate Longevity Risks

Fortunately, you can take proactive steps to align your savings with longer timeframes. Critical longevity planning strategies include:

Delay Claiming Social Security

Waiting to begin Social Security until at least full retirement age increases payments. Each year you delay past FRA up until age 70 earns delayed retirement credits worth about 8% more annually. These permanently higher payments provide more income in later years when savings may be declining.

Use Conservative Withdrawal Rates

To avoid over-depleting savings, limit annual portfolio withdrawals to 3-4% of total assets. This sustainable withdrawal rate allows for longevity, market volatility, and rising costs. Also adjust withdrawals yearly for inflation to maintain purchasing power.

Maintain Significant Retirement Savings

Having ample savings provides more longevity protection. Target totals of at least 25-30 times your desired annual income by retirement. Withdrawals from larger balances can fund longer retirements.

Prioritize Growth Investing

The best defense against savings shortfalls over long retirements is robust portfolio growth. Emphasize equities over conservative assets for growth prospects. Monitor allocation and rebalance as needed.

Generate Retirement Income

Pursuing supplemental income via pensions, part-time work, rental income, annuities or other strategies provides sustainability. Even modest added income goes far over decades.

Seek Professional Guidance

For help devising a personalized longevity plan, consult a fee-only financial advisor. Their expertise can help you mitigate risks and feel confident about your strategy.

Planning for Longevity Risk in Retirement Savings

Building Flexibility for Changing Retirement Needs

While no plan is perfect, incorporating flexibility helps address shifting needs in retirement:

  • Maintain emergency funds and liquid assets as reserves
  • Be open to part-time work or side income if needed
  • Include home equity as potential reserve to tap if necessary
  • Limit large expenditures to earlier years
  • Update plans annually and modify assumptions as longevity data changes
  • Have backup plan if forced retirement comes earlier than expected
  • Consider relocating to lower costs if savings fall short

With the right mix of prudent planning, conservative assumptions, and flexibility, you can be ready for retirement no matter how long your golden years last. Don’t let longevity risk derail your dreams.


As increasing longevity trends show no signs of slowing, managing longevity risk is crucial for retirement security. Taking proactive steps like delaying Social Security, utilizing conservative withdrawal rates, emphasizing growth investing and building in contingencies can help ensure savings stand the test of time. With proper planning, you can enjoy your retirement years without fear of outliving your money.

A Ahmad
A Ahmad

A Ahmad, a certified financial planner, Retirement Step was created to share over two decades of retirement planning experience with readers looking to take control of their financial futures.

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