What\u2019s Changed About Life Expectancy\u2014and Why It Matters <\/p>\n
People are living longer nowadays. According to the Centers for Disease Control and Prevention (CDC), the average life expectancy was 75.8 years for males, 81.1 years for females, and the average for both sexes is 78.4 years in 2023. But these averages don\u2019t tell the whole story. Medical advances mean more people are living into their late 80s and 90s than ever before.\n<\/p>\n
A longer life means more years in retirement, and that shift has real consequences on retirement planning. Some people face shorter retirements due to health issues, while others may need their money to last far longer. Planning for your retirement<\/a> is less about guessing an exact life expectancy and more about being prepared for however long you live.\n<\/p>\n Why Old Retirement Assumptions No Longer Hold <\/p>\n For a long time, retirement planning<\/a> had a fairly standard formula: work for 40 years, retire, and expect 15 to 20 years of post-work life. That model made sense when pensions were common and people didn\u2019t routinely live decades past retirement.\n<\/p>\n Today, many retirees are looking at 25, 30, or even 35 years of retirement. Over that kind of timeline, small risks turn into big ones. Inflation<\/a> has become a major factor lately, as we saw the highest year-over-year inflation rates in 2022 and 2023 that the US has experienced in about 40 years.\n<\/p>\n Healthcare costs tend to rise with age, as does the need for more doctor visits and medication. Market downturns can hit harder when withdrawals are taken over decades. When you are living on a fixed income during your retirement years, all of these factors can make a huge difference in buying power and quality of life.\n<\/p>\n The Biggest Retirement Risks in a Longer-Life World <\/p>\n The biggest risk for many during their retirement years is running out of money. That\u2019s the core issue that longer life expectancies create. Longevity risk<\/a>, or the chance that savings don\u2019t last as long as you do, sits at the center of modern retirement planning.\u00a0<\/a>\n<\/p>\n With retirees living longer, the need for long-term care also continues to grow. Based on National Center for Health Statistics data, the number of nursing home residents could increase by as much as 75% over the next decade. Healthcare costs add another layer of stress, especially since Medicare doesn\u2019t cover all the costs.\n<\/p>\n Important<\/p>\n Market risk also looks different in retirement. A rough stretch early on, known as sequence-of-returns risk<\/a>, can permanently weaken a portfolio and negatively impact the overall return that will be available to the retiree.<\/p>\n How Retirement Planning Should Adapt <\/p>\n Plan for Ranges, Not a Single Age: Instead of planning to the average life expectancy age of 79, many planners now suggest building plans that can last to age 90 or 95. That doesn\u2019t mean you expect to live that long. It means you don\u2019t want your plan to fall apart if you do.\u00a0\u00a0\u00a0 What This Means If You\u2019re Already Retired <\/p>\n If you\u2019re already retired, it\u2019s not too late to make adjustments. Reassessing spending, adding flexibility to withdrawals, or downsizing housing can all help money last longer.\n<\/p>\n Tip<\/p>\n Consider revisiting investment mix and healthcare planning<\/a> from time to time. Small changes can make a meaningful difference in how long your retirement nest egg can last.<\/p>\n What This Means If You\u2019re Still Working <\/p>\n If you\u2019re still working, the goal isn\u2019t to build a perfect plan, it\u2019s to build a resilient one. Saving more helps, but so does staying flexible. Investing in your health, keeping skills current, and staying open to part-time retirement options can create more choices down the road. A longer life doesn\u2019t mean you have to work forever. It means you may have more ways to shape how work fits into your later years.\n<\/p>\n Psychological Shift: Planning for a Longer Life <\/p>\n Ideally, living longer in your retirement years should be a gift, not a financial burden.\u00a0Retirement works better when it\u2019s seen as a long chapter, not an ending. Putting away as much money as you can early on, looking into long-term care insurance<\/a>, and estate planning before you reach retirement can help you maximize your golden years without financial strain. Plan for what you can, but be willing to adapt those plans when necessary.\n<\/p>\n The Bottom Line <\/p>\n Life expectancy is rising, but averages mask a wide variation\u2014some people spend decades in retirement while others face shorter timelines\u2014making traditional retirement assumptions outdated. With many retirees now planning for 25 to 35 years of post-work life, risks like inflation, healthcare costs, longevity risk, and market volatility matter more than ever.\n<\/p>\n
\nRethink Withdrawal Rules: The 4% rule<\/a> is a commonly used retirement strategy that recommends withdrawing 4% of your savings during your first year of retirement, then increasing that amount each following year to keep pace with inflation, with the goal of making your money last for about 30 years. While this is a solid plan for many investors during their retirement years, flexibility is key. Adjusting spending based on markets, health, and real-life needs can make a plan far more durable.\u00a0
\nDelay Social Security When Possible: Delaying Social Security<\/a> can significantly boost your monthly income. Each year you delay past full retirement age increases your guaranteed monthly benefit for life. Perhaps if you are still working part-time or have other sources of income, it may make sense to delay taking a smaller monthly amount at the earliest point of eligibility and wait a few years for a guaranteed higher amount.
\nMaintain Growth Later in Life: Longer retirements often mean portfolios need some growth well into later years. Going conservative too soon can increase the risk that your savings don\u2019t keep up with inflation. That said, too much risk can lead to greater losses if the market dips.
\nBuild Income Layers: The most resilient retirement plans don\u2019t rely on a single source of income. Social Security, pensions, investment income, part-time work, and annuities<\/a> can work together to spread risk with diversity and provide stability.<\/p>\n