Retirement Planning for Longevity: How to Prepare for a Long and Fulfilling Retirement

By Jeffrey Meenes, CFP® (Published Date May 2, 2024)

When considering your retirement strategy, how much thought do you give to how long you might live? It can be an uncomfortable reality to consider, but this shouldn't discourage you from seriously considering it.

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

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 a retirement strategy.¹

For example, healthcare costs must be incorporated. As you age, your healthcare needs will likely grow from simple doctor's visits to potentially living in an extended care facility. These costs naturally increase over time, whether through inflation, market volatility, or other factors. So, while you can look at today's prices as a guide, you will likely need much more money to cover your healthcare. Medicare will help, but it doesn't cover everything, including a lengthy stay in extended care.²  It could make sense to consider how you might mitigate healthcare costs with long-term care insurance or health savings accounts.

Your retirement strategy might include a spending and goal plan considering travel, spending time with family, or pursuing hobbies and interests. It could also enable a longer life and cover its expenses. Unless you work beyond retirement age, it can be difficult to make up for a market dip, emergency expense, or heavy spending, so your strategy should cover many circumstances. Creating a comprehensive spending plan that considers both essential expenses and discretionary spending in retirement can help create a balanced budget that aligns with your long-term financial goals.

How much will you need to withdraw annually without diminishing your account too quickly while still controlling for 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

You need to consider various factors while planning your retirement, such as focusing on tax-efficient withdrawals from your retirement accounts. You may also decide to work longer or opt for Social Security later, which can lead to larger monthly payouts and help you extend your retirement strategy. Working with a qualified financial professional, such as a Certified Financial Planner (CFP®), is recommended to develop a personalized retirement strategy that fits your needs and goals. Developing a prudent retirement strategy is significant, and having the right help can be a huge relief.