The Biggest Risks To Your Retirement (Part 1): Longevity

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103 – Planning your retirement relies heavily on estimating how long you and your partner will live in retirement, but many individuals have trouble estimating their longevity.

In this episode, Jeremy Keil talks about one of the biggest risks to retirement – longevity. He explains the most common mistakes when planning for longevity and provides resources along with a 3-step action plan for how to plan more accurately.

Jeremy discusses:

  • How to estimate your life expectancy using Longevity Illustrator
  • The intricacies of planning for a joint life expectancy
  • Why some people overestimate their longevity and the consequences that follow
  • A 3-step action plan for longevity
  • And more

The Biggest Risks To Your Retirement: Longevity

What Are The Problems?

The problem with longevity isn’t so much how long you live; although it’s a risk, it’s really your thoughts and beliefs that are most likely wrong about longevity.

According to Longevity Risk: Plan for the Unknown, by Kate Beattie with Capital Group, a lot of people say, “I’m not going to live past my life expectancy,” or “I’ll make it to whatever that number is,” or “I’ll be lucky to get to this number.”

Approximately half of retirees underestimate their life expectancy by at least five years.

You’re probably thinking, “well, I’ll just add five years to my estimate, and my plan will be more accurate.” While this will likely get you closer to reality, many also incorrectly estimate when they’ll start retirement, which throws off their estimate of how long they’ll live in retirement.

According to the Employee Benefits Research Institute’s 2022 Retirement Confidence Survey, the average person retires 3 years before they plan. And half of retirees report having retired before they expected.

In addition, joint life expectancy adds another layer of complexity to the process. If you have a spouse, you need to plan for the likelihood that one of you will live longer than the other. 

It’s hard to estimate exactly how long we’ll live, so we need extra help and guidance to estimate our life expectancy and longevity in retirement.

Life Expectancy

One of the main sources of life expectancy estimates people pull from is their family history. Predicting how long they think they’ll live based on how long their parents, grandparents, and even great-grandparents have lived – It’s just not accurate.

There are too many factors that can significantly change your life expectancy and make yours differ from your family’s, like medical history, access to medical care, and so on. 

The four biggest factors are:

  1. Your age
  2. Your gender
  3. If you’re a smoker or non-smoker
  4. Your health history

Everyone needs their own personalized life expectancy and retirement longevity estimates.

Personalized Longevity

When you retire and how long you live determine how long you can enjoy retirement. Both of these differ for everyone.

That’s why it’s important not to base them on family history or statistical averages.

For example, if your grandparents passed away at age 70, are their life experiences relevant to you? They may have lived through WWII or worked in a factory that would never hold up to the same health standards in today’s society. All of these factors impact longevity – but not necessarily YOUR longevity.

We recommend using Longevity Illustrator to help estimate your longevity by taking important factors into consideration and providing the probability of each.

Focus On The Risk, Not The Averages

Don’t base your life expectancy on the averages. Focus on the risks of each instead.

The risks of dying too early, estimating your life expectancy incorrectly, and dying too late must all be considered and prepared for.

We want to analyze the probabilities of living beyond the average, dying before the average, and assessing risk based on these probabilities.

So, we need to think of the different risks, not just what if one partner dies too soon or if one lives too long, but what if one lives too long and the other dies too soon, which could all average out but still be a horrible situation.

When estimating your longevity, you need to think those risks through and maybe make some decisions with your pension and social security that combat those risks.

Longevity: A 3-Step Action Plan

To summarize the above and give you a check-list for estimating your longevity, we created a 3-step action plan:

Step 1: Think About Your Longevity Risk Tolerance

You’re probably used to the idea of your investment risk tolerance when you or your advisor use tools and questionnaires to consider how much risk you’re willing to put up with in the stock market going up and down.

However, there’s another important factor to consider when planning for your financial future: longevity risk tolerance. In other words, how prepared are you for the possibility of living a long life?

While it may seem like a morbid topic to think about, longevity risk tolerance is an important part of financial planning. After all, if you live a longer-than-average life, you’ll need to have enough money saved up to cover your living expenses for those additional years. On the flip side, if you die before your life expectancy, you’ll want to have something in place so that your loved ones are taken care of financially.

The first thing is to start adding this idea of your longevity risk tolerance to your retirement planning, not just your investment risk tolerance.

Step 2: Get A Personalized Longevity Estimate

Go to Longevity Illustrator and plug in your information – male, female, age, health history, smoker, non-smoker – and that will give you a personalized estimate that’s far better than just reading the paper and hearing that today’s life expectancy is 78 years old, or basing it on your family’s health history alone.

They give you the probabilities as well, which is great for helping you understand what the odds are if you live past your average life expectancy and how long that might be, and let you plan for a decent amount of time after the average life expectancy without planning too far.

Step 3: Plan For Success, Prepare For Failure

You really need to think this through and consider what might happen in a failure situation where one person passes away too soon or the other lives longer than average.

As much as we all would like them to, life doesn’t always go according to plan. That’s why it’s so important to have a plan—a way to help weather the storms that come your way, financially speaking. 

Pension, social security, annuity decisions, and tax decisions – for these decisions, you need to consider not how you’ll get the most money next month but how you’ll get the most money out of your whole lifetime, the most money for your widow, the most money in case bad things happen with the stock market or in case we live longer than expected. 


To learn more about Longevity, check out the resources below!

If you have any questions, feel free to contact us using the contact information provided below!


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