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What is Longevity Risk?

David Silver, CFP®, CEPA®
David Silver, CFP®, CEPA®
 

Longevity risk is the risk of you outliving your savings for retirement due to a longer than expected life expectancy. Life expectancy is increasing, and your retirement benefits could be completely exhausted without proper planning and saving. As many prospective retirees shift to defined contribution plans or individual retirement savings, they face more significant financial burdens and risks than generations before them.

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Life Expectancy: Making Your Money Last

Average life expectancy is on the rise compared to previous generations, and even small changes can significantly impact retirement plans. Specific projections such as individual health and family history can also affect how long someone will live. Despite rising life expectancy, many Americans can underestimate their life spans and retirement needs.

Retire longevity calculators use medical and scientific data to assess an individual's health, history, and other details to estimate their life expectancy. While these tools can provide a broad estimate of your potential retirement length, meeting with one of our retirement specialists can help finalize your exact needs.

What to Consider in Retirement

Life expectancy estimates can provide insight into average living expenses, but they don't account for emergencies or unexpected life events. Major illnesses or injuries that bring about special needs and even divorce can affect retirement plans and completely change the basic formula for living expenses in retirement. While you may still be able to fund your monthly expenses, it could diminish opportunities to enjoy leisure or travel.

Our approach is integrated, strategic and instrumental in realizing your vision for your wealth.

Independent Living Vs. Assisted Living

 

Keep in mind that your living arrangements may change your retirement expenses equation. We all want to stay at home and rely on loved ones for support, but you may need to hire professional in-home assisted living services, which could drastically change your financial picture.

You may also decide that an assisted living retirement community might become necessary. As we grow older, the activities and conveniences of these communities may become appealing, while others might simply need the support for their health.

Longevity Annuities

 

Annuities may be one of the ingredients in the recipe for a sustained retirement. Before retirement, the individual provides an initial premium payment to the contract. Annuities generally start between the ages of 75 and 85, and in return, they offer a potential guaranteed income stream.

Instrumental Wealth, LLC (“Instrumental Wealth”) is an SEC registered investment adviser located in Florida. Registration does not imply a certain level of skill or training. Instrumental Wealth may only transact business in those states in which it is notice filed or qualifies for an exemption from notice filing requirements. Information about Instrumental Wealth (inculcating its services, fees, and registration status) is available on the SEC’s IAPD website at www.adviserinfo.sec.gov. There is no guarantee that the views and opinions expressed in this presentation will come to pass. Advisory services are only offered to clients or prospective clients where Instrumental Wealth and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Instrumental Wealth unless a client service agreement is in place.

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