New research warns that many retirement plans may underestimate how long savings must last. A recent analysis highlights a 13-year gap in life expectancy at birth and notes that 12.6% of people who reach age 60 are projected to live to 90.
Longevity risk and the influence of early market returns can shape retirement outcomes, underscoring the need to test whether a corpus can withstand a longer horizon.
Five-step longevity checklist
- Revisit life expectancy assumptions using current data and factor in the possibility of living well beyond the average span.
- Estimate retirement duration and plan withdrawals across different age scenarios to avoid running dry in later years.
- Model investment returns and sequence of returns risk in the early and middle years of retirement.
- Account for inflation and rising healthcare costs that accompany longer lifespans.
- Building buffers and considering income guarantees or annuity options can help shore up longevity risk.
