Longevity Risk: The Cost of Living Longer

Key Takeaways

• Living longer increases the risk of outlasting retirement savings.
• Even a few additional retirement years can significantly raise income needs.
• Guaranteed lifetime income can help manage longevity risk and reduce uncertainty.

Longevity risk is the risk of outliving your retirement income. Living longer is good news, but it also means your money needs to stretch further—often years longer than it did for previous generations.

For example, a retiree who plans for 20 years of retirement starting at age 65 may need hundreds of thousands of dollars more if they live into their 90s or beyond. Inflation compounds the problem, steadily increasing everyday expenses like food, housing, and healthcare.

Because no one knows exactly how long they’ll live, longevity risk is one of the hardest retirement income challenges to manage. Relying solely on investment portfolio withdrawals can be stressful, especially later in life, when flexibility to adjust spending may be reduced.

Many retirees address longevity risk by ensuring a portion of their income is guaranteed for life. This approach helps reduce uncertainty and provides confidence that essential expenses can be covered no matter how long retirement lasts.

‍

Disclosures:

This material is provided for educational purposes only and does not constitute investment, legal, tax, or insurance advice. It should not be relied upon as a recommendation to purchase, sell, or exchange any security or insurance product. Investors should consult their financial, tax, and legal professionals before making financial decisions.

Annuities are insurance products issued by insurance companies. Guarantees are subject to the claims paying ability and financial strength of the issuing insurer. Product features, limitations, fees, surrender charges, and availability vary by contract and carrier.