Why Standard Projections Fall Short

Most retirement plans use life expectancy tables based on population averages. If you're a 65-year-old woman, the tables might say you'll live to about 86. A man the same age might get 84. So your advisor plans to age 90, adds a few years of "cushion," and calls it conservative.

The problem? Those are averages. Half of people live longer than average. And if you're reading this—if you're someone who takes care of their health, has access to good medical care, and has the financial resources to afford it—you're probably in the half that lives longer.

For a healthy, affluent 65-year-old couple, there's roughly a 50% chance that at least one spouse will live past 90. A 25% chance one will reach 95. Those aren't edge cases—they're real possibilities that deserve planning.

The Compounding Problem

Living longer doesn't just mean more years of spending. It means:

More years of inflation. At 3% annual inflation, prices double every 24 years. Something that costs $100,000 today will cost $180,000 in 20 years and $240,000 in 30 years. A retirement that starts comfortably can become a squeeze if inflation outpaces your income.

More years of potential healthcare costs. Healthcare spending accelerates dramatically in the final years of life. Extending your lifespan by five years doesn't just add five years of normal expenses—it often adds the most expensive years.

More years of market risk. A 30-year retirement has to survive multiple market cycles. A 40-year retirement has to survive even more—including the possibility of a "lost decade" occurring right when you need stability most.

More years of cognitive risk. Living longer increases the odds of cognitive decline. At some point, you may need help managing your money—which means your financial plan needs to be simple enough for someone else to execute.

What a 95% Success Rate Actually Means

Many advisors use Monte Carlo simulations to project retirement outcomes. These models run thousands of scenarios with different market returns and tell you the percentage that "succeed" (don't run out of money).

A 95% success rate sounds great. But consider what it actually means:

5% of scenarios fail. That's 1 in 20. Would you board a plane with a 1-in-20 chance of crashing? For most people, that's not an acceptable level of risk for their life savings.

The model has a fixed endpoint. If the plan runs to age 90 and you live to 95, the success rate is meaningless for those extra five years. The model simply didn't consider them.

"Success" means dying with $1. In many models, a scenario counts as successful if you have even one dollar left at death. That's technically not running out of money, but it's not the comfortable retirement most people envision.

Models assume consistent spending. Real life is messier. An unexpected expense—a home repair, a family emergency, a market panic that makes you spend defensively—can knock the plan off course.

Strategies to Protect Against Longevity Risk

There's no single solution to living "too long." But there are several strategies that, combined, can provide meaningful protection:

1. Delay Social Security

Social Security is the closest thing to longevity insurance most people have. It's a guaranteed income stream that adjusts for inflation and lasts as long as you do.

Benefits increase roughly 8% for each year you delay claiming between ages 62 and 70. That's an 8% guaranteed, inflation-adjusted return—something you can't get anywhere else. If you live to 90, waiting until 70 to claim can mean an extra $100,000+ in lifetime benefits compared to claiming at 62.

The tradeoff: You need other resources to bridge the gap while you wait. But for people with substantial savings, this is often the single best move against longevity risk.

2. Create a "Longevity Reserve"

Instead of planning to age 90 and hoping for the best, explicitly set aside funds for the possibility of living past your target age.

This might mean investing a portion of your portfolio more aggressively than the rest—accepting more volatility in exchange for higher expected growth. You won't need this money for 25-30 years, so short-term fluctuations matter less. If you don't live that long, it becomes part of your estate. If you do, it's there when you need it.

3. Consider a Longevity Annuity

A deferred income annuity (sometimes called a "longevity annuity" or QLAC when held in a retirement account) starts paying income at a future age—typically 80 or 85.

Because the insurance company only pays if you're still alive at that age, the cost is relatively low. For example, a 65-year-old might pay $100,000 today for a policy that pays $25,000-$30,000 annually starting at age 85. If you die before 85, you (or your heirs) get nothing. But if you live to 95, you've received $250,000-$300,000 from a $100,000 investment.

This isn't right for everyone—it requires giving up access to that money, and the payments only help if you live long enough. But for people worried specifically about outliving their assets, it's a powerful hedge.

4. Build in Spending Flexibility

Fixed spending targets create fragile plans. If your plan requires spending exactly $180,000 per year, any deviation—positive or negative—throws off the projections.

A more resilient approach separates spending into categories:

Non-negotiable expenses: Housing, healthcare, food, insurance—things you need regardless of market conditions.

Discretionary expenses: Travel, entertainment, gifts—things you want but could reduce if necessary.

Aspirational expenses: Dream trips, major gifts, second homes—things you'll do if the portfolio performs well.

When you have built-in flexibility, a bad market year doesn't threaten your entire retirement—it just means postponing the trip to Italy or giving smaller gifts this year.

5. Plan to Age 100 (or Beyond)

The simplest solution is often the most powerful: extend your planning horizon. If your plan works through age 100, you have meaningful protection against longevity risk.

This might mean spending slightly less in your 60s and 70s than you otherwise could. But the peace of mind—knowing that you have decades of runway even if you beat the actuarial tables—is worth more to most people than marginal additional spending today.

What About Your Spouse?

Longevity planning for couples adds another layer of complexity. Consider:

Women typically live longer than men. If there's an age gap too, the surviving spouse may need income for a decade or more after the first spouse dies.

Social Security changes at death. A married couple receives two checks. When one spouse dies, the survivor keeps only the higher of the two. This can mean a 30-50% drop in Social Security income at exactly the wrong time.

Tax brackets change. A surviving spouse files as single, which means the same income is taxed at higher rates. Required minimum distributions that were comfortable for a couple can push a widow or widower into the highest brackets.

Healthcare costs remain. The surviving spouse still needs supplemental insurance, potential long-term care, and coverage for all the expenses that existed before—but with less income to pay for them.

Effective longevity planning for couples isn't just "plan until the second spouse dies." It's planning for two distinct phases: the joint lifetime and the survivor lifetime, each with different income needs, tax situations, and risk exposures.

When to Revisit Your Plan

A spending target isn't a set-it-and-forget-it number. It should be revisited when:

Your health changes. A serious diagnosis might shorten your planning horizon. A clean bill of health might extend it.

Markets have a strong run. If your portfolio has grown significantly, you may be able to afford more spending or have more margin for longevity.

Markets decline. A major downturn, especially early in retirement, may require adjustments to preserve long-term sustainability.

Tax laws change. Changes to Social Security, Medicare, or income tax rates can affect how long your money lasts.

Your spending changes. Many retirees spend more in the "go-go" years (65-75), less in the "slow-go" years (75-85), and more again in the "no-go" years (85+) due to healthcare. A static spending target may not reflect your actual pattern.

What We Do Differently

Most advisors run a Monte Carlo simulation, show you a success rate, and move on. We go deeper.

We stress-test your plan against extended lifespans—not as a worst case, but as a realistic possibility. We model the survivor scenario explicitly, including the tax and income changes that come with it. We help you understand not just what you can spend, but what happens if you need to adjust.

We also help you implement protection strategies: optimizing Social Security claiming, considering annuities where appropriate, building spending flexibility into your lifestyle, and creating a longevity reserve for the later years.

The goal isn't to scare you with worst-case scenarios. It's to give you genuine confidence—not just "95% success rate" confidence—that your money will last as long as you do.

If you've been given a spending target and wondered whether it's really enough, let's talk. We'd be glad to take a fresh look at your projections and help you plan for a long and financially secure life.