Do You Really Need to Prepare to Live to 100?

How long do you plan to live? Ridiculous question, right? If we could know exactly how long we will live, it would make life (and retirement planning) so much simpler. But, we don’t know. We can look at many variables to come up with estimates, but our predictions aren’t perfect.

Faced with increasing lifespans, many Americans worry about the risk of running out of money later in life. According to longevity statistics, there’s a 72% chance that at least one member of a married couple will live to age 85 and an 18% chance that one of them will live to see age 95. If your retirement income calculations assume that you’ll only live to 75 or 80, and you or your spouse live longer, you may withdraw too much and deplete your savings too soon.

To combat longevity risk, it might seem logical to assume that everyone will live to be 100 and plan for a very long retirement. However, using a default assumption that is too high can be as damaging as using one that is too low.

While no one wants to outlive their savings, most of us also want to be able to enjoy retirement as much as possible. Putting off retirement to save more or forgoing retirement fun to have more money later can also have consequences.

To customize your own longevity assumptions, consider factors like:

Your current health and lifestyle

If you are generally healthy, get regular exercise, eat a balanced diet, and visit the doctor when needed, you might have a better chance of living longer.

Your family history

One of the best predictors of your lifespan is that of your parents and close relatives. If your family members tend to live well into their 80s and 90s, you may need to adjust your longevity assumptions higher.

A margin of error

No one can predict their own lifespan with any accuracy. We can use as many variables as possible, but they are just our best educated guesses. One way that retirees can hedge their longevity assumptions is by creating income streams that will cover basic expenses. Social Security, annuities, and other sources of income can help you ensure that you still have income if you live longer than expected.