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Money & Longevity

When contemplating your retirement strategy, how much thought do you give to how long you might live? It can be a very uncomfortable thing to consider, but this shouldn't dissuade you from giving it some serious thought.

For many people preparing for retirement, one of the biggest fears they have is running out of money. According to the Social Security tables, if you have already lived to 65 years, you will probably live to at least 84 years if you're a male, and 87 years if you're a female. These are obviously only estimates, but it's important to bear in mind that you could live much longer than you expect, and some household members could outlive others by many years.1

In fact, you might live to 100 years and beyond: the National Institute on Aging anticipates that the number of centenarians will grow by a factor of 10 during the first half of this century, representing a host of challenges for anyone attempting to devise their retirement strategy.1

As an example, healthcare costs must be incorporated into the plan. As you age, your healthcare needs will likely grow from basic things like a simple doctor's visit to potentially living in an extended care facility. Naturally, these costs increase over time, whether through inflation, market volatility, or other outside factors. Meaning, while you can look at today's prices as a broad guide, you will most likely need significantly more money to cover your healthcare costs. Medicare will help, but it doesn't cover everything, including a lengthy stay in extended care.2

You might have included in your retirement strategy a spending plan that considers the likelihood that you will want to travel, pursue your interests, and spend time with family. It should also allow for a long life and cover the associated financial expenditures of that long life. Unless you are working beyond your retirement age, it can be difficult to make up for a market dip, emergency expense, or heavy spending, so your strategy should consider many varying circumstances.

How much will you be able to withdraw every year without diminishing your account too quickly, while still considering inflation and other factors? Calculating this as part of your retirement strategy may be essential. While some financial professionals have downplayed the 4% rule in recent years—the amount of your investments used in the first year of retirement—and have revised it upward or downward as needed, the theory is that you may be able to live on your retirement funds for upwards of 30 years or more.3

Other factors to consider include focusing on tax-efficient withdrawals from your retirement accounts. You might also decide that working longer or taking Social Security later (allowing for larger payouts per month) could extend your retirement strategy even further. Of course, these topics and others will be addressed when you choose to work with your trusted financial professional to form a retirement strategy and put it into action. If nothing else, you should now appreciate what a significant undertaking your retirement strategy represents, as well as how relieving it will be to have help along the way.

  1. https://www.rbcwealthmanagement.com/en-us/insights/will-you-outlive-your-money-in-retirement-3-risks-to-plan-for-now
  2. https://www.npr.org/2022/02/19/1081875948/inflation-has-many-retirees-worried-about-outliving-their-savings
  3. https://www.cnbc.com/select/what-is-the-4-percent-retirement-savings-rule/