With life expectancies increasing, an average, healthy 65-year-old couple retiring in 2021 can expect to reach 87 (male) and 89 (female)1. Longer lifespans mean more time to enjoy life after leaving the workforce. But they also mean that retirees must fund more years of living expenses. Otherwise, they risk outliving their money. That’s called longevity risk.
Longevity risk is a common worry for retirees and pre-retirees today. In fact, in American Century’s 2021 9th Annual Survey of Retirement Plan Participants, 42% of retirement plan participants between ages 27-56 said they were most concerned about the possibility of outliving their money, while over a third of those ages 57-75 cited the same concern as their biggest worry.
How to Manage Longevity Risk
It’s perfectly reasonable to be concerned about longevity risk. Fortunately, you can reduce this risk through careful planning. Here are a few tips that may help.
Estimate how long your money needs to last.
Having a realistic understanding of how long your retirement may continue can help you plan accordingly. You can’t predict your life expectancy with 100% accuracy, but tools like the Actuaries Longevity Illustrator may help you forecast how long you might live based on your age, health and gender.
For instance, if you retire at age 65, you may need to plan for 30 to 35 years of retirement. Continuing to work after age 65 or taking a part-time job as you transition out of full-time work could help you stretch your money a little longer.