Health, family history and circumstances may inform the discussion, but no one knows an individual lifespan.
Longevity risk is the risk that you live longer than the money can support. It is good news to live a long life; the financial risk comes from planning around a date that arrives too soon.
Couples must also consider that one person may live much longer than the other, and that household costs do not necessarily halve after a death.
A longer life extends exposure to inflation, healthcare costs, investment uncertainty and fees. It also changes the value of guaranteed lifetime income compared with flexible invested income. A responsible plan tests a range rather than declaring one age “safe”.
Try this now
Look at the final age used in your retirement projection. Ask what happens if either partner lives five or ten years longer. Check whether spending, medical costs and surviving-spouse income continue realistically.
Ask your advisor
- Which income is guaranteed for life and which depends on remaining capital?
- What longevity range has been tested?
- How does the plan protect the surviving household member?
Longevity cannot be predicted away. It must be shared, insured, funded or managed through clear trade-offs.
Next: Once withdrawals begin, the order of the years matters