How Long Will You Live? Why It Matters for Retirement

Here's an uncomfortable question: What if you live to 95? Not as a hypothetical, but as a real possibility you need to prepare for. Most Americans retiring at 65 plan their finances around living to their late 70s or early 80s, roughly matching national averages. But here's the catch: averages include people who die young. If you make it to 65 in good health, your odds of hitting 90 or beyond are significantly higher than you think.

This isn't about being morbid. It's about being smart. Understanding your life expectancy for retirement planning isn't just another data point. It's the foundation of every financial decision you'll make from here forward, from how much you save in your 401(k) to when you claim Social Security, to whether you need long-term care insurance.

Let's explore why the question "how long will I live in retirement?" matters so much, and more importantly, what you should do about it.

According to the Social Security Administration, a man reaching age 65 today can expect to live, on average, until 84. A woman turning 65 can expect to reach 86.5. But here's what most people miss: those are averages, which means half of people will live longer.

The statistics get even more interesting when you look at couples. For a married couple both aged 65, there's a 50% chance that at least one spouse will live to age 92. There's a 25% chance one will reach 97. These aren't rare outcomes. They're common enough that planning for them isn't pessimistic, it's prudent.

Several factors influence your personal life expectancy:

• Health status: If you're in good health at 65, your odds of extended longevity increase significantly
• Family history: Genetics play a substantial role in lifespan
• Lifestyle choices: Non-smokers, moderate drinkers, and those who exercise regularly tend to live longer
• Gender: Women consistently outlive men by an average of 5-7 years
• Education and income: Higher education and income levels correlate with longer lifespans
• Geographic location: Life expectancy varies by state, with differences of up to 7 years between highest and lowest

If you're reading this article about retirement planning, you're already ahead of the curve. People who actively plan their finances tend to have longer, healthier lives than those who don't.

Longevity risk is the financial danger of outliving your money. It's not the risk of dying young (that's what life insurance addresses). It's the risk of living "too long" for your savings to last.

Consider this scenario: You retire at 65 with $500,000 in your 401(k) and IRA accounts. Using the common 4% withdrawal rule, you'd take out $20,000 annually. Combined with Social Security benefits of, say, $30,000 per year, you'd have $50,000 in annual retirement income. Sounds reasonable for a 20-year retirement ending at 85.

But what happens at 86? Or 90? Or 95? If you're still living (and statistics say there's a good chance you will be), your savings could be depleted or severely diminished. Meanwhile, your expenses haven't disappeared. In fact, healthcare costs typically increase significantly in your 80s and 90s.

This is why financial planners increasingly recommend planning for a 30-year retirement, not a 20-year one. A retirement from 65 to 95 requires roughly 50% more savings than one from 65 to 85. That's not a small difference.

Understanding your potential lifespan should directly influence several critical retirement choices:

Social Security claiming strategy: Every year you delay claiming Social Security between 62 and 70, your benefit increases by approximately 7-8%. If you expect to live into your 90s, delaying until 70 can result in hundreds of thousands of dollars more in lifetime benefits. Conversely, if you have serious health issues suggesting a shorter lifespan, claiming earlier might make sense.

401(k) and IRA withdrawal strategy: A longer expected lifespan means you need a more conservative withdrawal rate. Instead of the traditional 4% rule, you might need to plan for 3% or 3.5% if you're planning for 30-35 years of retirement. This directly impacts how much you need to save.

Investment allocation: If you'll potentially be invested for 30+ years in retirement, you can't afford to be too conservative too early. Many retirees shift entirely to bonds and cash in their 60s, but that strategy fails if you need growth to last until your 90s. A balanced approach that maintains some stock exposure throughout retirement becomes essential.

Healthcare and long-term care planning: Medicare covers many healthcare costs starting at 65, but it doesn't cover long-term care (nursing homes, in-home care, assisted living). The average person needs some form of long-term care at age 85. If you're planning to live to 90+, you have a 70% chance of needing this care. That's why long-term care insurance or setting aside dedicated funds becomes crucial.

Housing decisions: Will your current home work when you're 85? 90? Stairs become harder, maintenance becomes challenging, and proximity to healthcare matters more. Planning for potential downsizing or relocating isn't just about freeing up home equity. It's about practical living as you age.

Annuities and pension choices: Products that provide guaranteed lifetime income become more attractive when you're planning for longevity. A portion of your portfolio in an immediate annuity or choosing a pension with survivor benefits makes more sense if you expect a 30-year retirement.

You don't need to know your exact death date to plan effectively. Here's what you should do instead:

1. Use age 95 as your planning horizon. Yes, it might seem excessive, but planning to 95 covers the vast majority of scenarios. If you happen to pass earlier, your heirs benefit. If you live longer, you're not destitute. This is much better than the reverse scenario.

2. Build flexibility into your plan. Create a retirement strategy with multiple levers you can pull if needed: reducing discretionary spending, downsizing your home, working part-time for a few more years, or relocating to a lower cost-of-living area. Knowing you have options reduces anxiety about longevity.

3. Maximize guaranteed income sources. Social Security is the only inflation-adjusted, guaranteed-for-life income most Americans have. Consider delaying your claim to maximize this benefit. If you have a pension, carefully evaluate payout options. The single life option pays more monthly but stops at death. The joint-and-survivor option pays less but continues for your spouse's lifetime.

4. Keep some growth in your portfolio. A common rule of thumb: subtract your age from 110 to determine your stock allocation percentage. At 65, that's 45% stocks. This ensures your portfolio can still grow to keep pace with inflation over a long retirement. As you age, you can gradually become more conservative, but don't abandon growth entirely in your 60s.

5. Plan for healthcare costs explicitly. According to Fidelity, the average 65-year-old couple retiring today will need approximately $315,000 to cover healthcare costs in retirement (this doesn't include long-term care). That's separate from your regular living expenses. Consider a Health Savings Account (HSA) if you're still working and eligible. HSA contributions are tax-deductible, grow tax-free, and withdrawals for qualified medical expenses are tax-free. It's the only triple-tax-advantaged account available.

6. Stress-test your plan for longevity. Use retirement calculators that let you adjust your expected lifespan. See what happens to your success probability if you live to 95 instead of 85. If your plan falls apart, you know you need to save more, plan to work longer, or adjust your expected retirement lifestyle.

7. Review and adjust regularly. Your expected longevity might change based on health developments, family history that unfolds, or medical advances. Review your retirement plan every 2-3 years, especially in your 50s and 60s when you still have time to make meaningful adjustments.

Planning for a long life isn't just a financial exercise. It has a profound psychological component. Many people resist planning for longevity because it forces them to confront their mortality. Others feel it's somehow "tempting fate" to plan for a long life.

But here's a healthier perspective: planning for longevity is optimistic. You're saying, "I expect to have many good years ahead, and I want to enjoy them without financial stress." It's not about obsessing over death. It's about ensuring life, however long it lasts, remains financially secure and dignified.

There's also freedom in accepting uncertainty. You won't know exactly how long you'll live, and that's okay. By planning conservatively (to age 95+), you've covered most scenarios. Then you can stop worrying about the timeline and focus on living well.

Many retirees report that having a solid financial plan, specifically one that accounts for longevity, reduces anxiety and improves their quality of life. They spend less time worrying about money and more time enjoying retirement. That's the real goal.

While understanding longevity risk is something everyone should do, creating a comprehensive retirement plan that addresses it often benefits from professional guidance. A fee-only financial planner (one who doesn't earn commissions on products) can help you:

• Run detailed projections based on your specific situation
• Optimize Social Security claiming strategies for married couples
• Coordinate Required Minimum Distributions (RMDs) from traditional IRAs and 401(k)s starting at age 73 with your tax situation
• Evaluate whether long-term care insurance makes sense for your situation
• Create a withdrawal strategy that balances longevity risk with market risk
• Consider Roth conversion strategies to manage taxes in a long retirement

Look for planners with certifications like CFP (Certified Financial Planner) or designations focused on retirement planning. The National Association of Personal Financial Advisors (NAPFA) maintains a directory of fee-only planners.

Disclaimer: The information provided here is for educational purposes only and should not be considered financial advice. fidser. is not a certified financial planning service. Always consult with a qualified financial advisor or planner before making significant financial decisions regarding your retirement planning.