Live to 100. Sounds great. But what are the downsides of longevity? “How can there be downsides?” you may ask. After all, you’d have more time to golf, go fishing, and spend with the grand-kids. Well, the risk may be that if you hadn’t planned to live that long you could end up running out of money. Very few people have sufficient retirement savings to live to 100. Yet, if you are already age 70, life expectancy of living to age 100 is 3% (one of every 33 people). If you make it to age 80, then your life expectancy to 100 jumps to 4% (one out of 25 people).
So how long of a retirement should you plan for? How can you prepare for significant longevity?
According to the IRS longevity tables, a 70-year-old person is expected to live for 17 more years to age 87. However, this is an average. Half of the 70-year-olds will live longer, and half will not. Therefore, a 70-year old individual who is basing his or her retirement plan and spending habits on living to 87 is rolling the dice. Furthermore, when you consider that there are more than 70,000 U.S. centenarians who represent the fastest-growing segment of our population, there is reason to take notice.
However, planning too conservatively could be detrimental as well. After all, you don’t want to cut your standard of living down to the point that you’ll be miserable. And of course, you always have the option to make adjustments in your spending as time goes on.
All of this comes down to two simple facts; you can control how long your money will last, but you only have a limited ability to predict how long you will live. So what can you do to reduce the risk of running out of money too soon?
A fixed immediate annuity offers an income that will continue for a lifetime, no matter how long you live, and it will help you plan for the possibility of living to 87, 107, or beyond. The other option is a reverse mortgage–your ace in the whole should you ever need it.