Are You Prepared for a 30-Year Retirement?

The good news? We’re living longer than ever. The bad news? Many retirees aren’t financially prepared for that extra time. Longevity risk—the chance of outliving your savings—is often overlooked, and it’s one of the biggest risks I see in retirement planning today.

In my conversations with clients, I often find that most people either underestimate their life expectancy or make a wild guess. None of us has a crystal ball, but taking a thoughtful, realistic approach to longevity can make or break a comfortable retirement.

While the Social Security Administration provides some basic averages, financial planning tools often suggest a more conservative approach. If you’re in good health or have longevity in your family, planning for a lifespan into your mid-90s can be wise. This estimate builds in a cushion, helping ensure your savings last throughout retirement—even if you live longer than expected.

Longevity estimates may bring surprises

The Society of Actuaries and American Academy of Actuaries recently relaunched a free online longevity illustrator.

To help people gauge their life expectancy, the Society of Actuaries and American Academy of Actuaries recently relaunched a free online tool called the *Longevity Illustrator*. It asks for a few basics about either an individual or a couple: age, sex, expected retirement age, smoking status, and a general health rating—poor, average, or excellent.

The tool provides an estimate of how long you might live, including the probability of reaching certain ages and how many years you might spend in retirement. I tried it myself recently. As a 43-year-old woman in “excellent” health, it gave me a 45% probability of living to age 93. That’s a significant insight in the world of retirement planning and underscores just how crucial it is to plan for the long haul. Taka a minute to estimate your own retirement on the tool here.

Key Areas to Help You Plan for Longevity

With longevity in mind, here are some key strategies that can help ensure financial stability through your golden years:

Saving Early

Starting early is one of the best ways to build a strong retirement foundation, and it’s more critical than ever today. If you haven’t already, sit down with a financial advisor to create a plan that accounts for inflation, potential medical expenses, and the reality of living longer. Be cautious of general “rules of thumb” when it comes to retirement savings. One-size-fits-all advice rarely works when planning for an extended retirement.

Delaying Social Security

If you anticipate a longer life expectancy, consider delaying Social Security benefits. For every year you delay past your full retirement age, your monthly payouts increase by about 8%, plus any annual cost-of-living adjustment (COLA), up until age 70. This delay can make a substantial difference in your overall retirement income. You can also review your income records to see how much monthly income you’d receive at different starting ages, which can provide valuable insights into your planning.

Making Catch-Up Contributions

If you’re 50 or older, take advantage of catch-up contributions. The IRS allows you to add more to tax-advantaged retirement accounts, letting you save more without exceeding the usual contribution limits. I’m always surprised by how quickly this extra saving adds up for clients who use it, giving their retirement fund a meaningful boost in the final years before retirement.

Considering a Phased Retirement

Another trend I’m seeing is phased retirement, where people transition from full-time work to part-time work rather than stopping work altogether. I have clients who take on side gigs or consulting roles. This helps them supplement their income and stay active without the full commitment of a nine-to-five job. It’s a wonderful way to keep engaged while easing into retirement.

Planning for Healthcare Needs

As we age, healthcare needs increase, and medical costs can become a major expense. Including long-term care and medical insurance in your retirement plan is essential. The goal is to prevent these costs from eroding your savings so you can keep your retirement fund working for you, not against you.

Adjusting Your Investment Strategy

It’s common to shift toward more conservative investments as you near retirement, but given today’s increased longevity, maintaining some growth-oriented investments may still be wise. Balancing conservative investments with options that have potential for growth can help your portfolio keep up with living costs, healthcare expenses, and inflation over a longer retirement.

Taking Action Now

Living a longer life is both an opportunity and a challenge. With careful, proactive planning, you can prepare to enjoy every moment of your golden years. I hope this gets you thinking about what longevity could mean for your financial future and encourages you to take steps to secure it. Working with a professional can make all the difference in creating a tailored plan that fits your unique circumstances. Longevity is a gift—one that deserves the best planning to make the most of it.

Sources:

^[1] Carlson, Bob. "Here's More Evidence In Favor Of Delaying Social Security Benefits." Forbes, 24 Feb. 2023, www.forbes.com/sites/bobcarlson/2023/02/24/heres-more-evidence-in-favor-of-delaying-social-security-benefits/?sh=3fcf61166e96. Accessed 9 Aug. 2023.

^[1] "Longevity Risk: Could You Outlive Your Savings?" Charles Schwab, 9 Jun. 2023, https://www.schwab.com/learn/story/longevity-risk-could-you-outlive-your-savings

^[1] How long you may live is one of retirement planning’s biggest unknowns. How experts say to get the best estimate, https://www.cnbc.com/2024/06/30/how-life-expectancy-figures-into-retirement-planning.html#:~:text=The%20projected%20life%20expectancy%20for,conditions%2C%20according%20to%20the%20research.

Investing involves risk and you may incur a profit or loss regardless of strategy selected. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Rebekah Fa’asau and not necessarily those of Raymond James.