The good news, the average 65-year-old woman will live until 85 (83 if you’re a man). Many more live longer, which means you’ll have 20 years or more to enjoy life away from the daily grind if you retire at age 65.

Now, the challenge: You’ll have to pay for it all.

Ultimately, to build a retirement plan for living longer, it’s important to minimize risks so you can get the most out of your savings for decades after you leave the workforce. It's a multifaceted, strategic approach that secures your savings so you can generate income efficiently. It also helps to ensure you won’t run out of money during retirement.

RISKS TO YOUR RETIREMENT SAVINGS

Broadly, there are six risks to address in a retirement plan for living longer:

Longevity: We’ve already touched on this one a bit. But if you live too long, without the right planning, you could run out of money.

Market Volatility: A poorly timed market downturn can be a big problem for your nest egg. When you have to sell investments during a downturn, you’ll have to sell more shares to generate the same amount of income. When the market recovers, fewer shares benefit from a rebound than if you had left your investments intact during the pullback.

Inflation and Taxes: While inflation has been low for years, it could return at any point. As prices rise, your purchasing power declines unless you can grow your nest egg at a brisker pace in retirement. Trouble is, beating inflation often requires taking on more risk with your investments. In addition, it’s impossible to know the future tax environment. If tax rates rise, they may take a larger chunk of your taxable income (that includes money you withdraw from your traditional 401(k)).

Health Care: Health care costs have been rising at a pace far exceeding inflation (more than 17 percent between 2013 and 20171). You’ll want to have a plan for how you’ll pay for healthcare and get to know the ins and outs of Medicare — the health care plan that covers all seniors.

Long-Term Care: Roughly 70 percent of people turning 65 will need some form of long-term care.2 A solid plan will account for costs associated with long-term care.

Legacy: Without a plan for what you want to leave behind, you may end up spending down assets that you intended to leave to your heirs. Or, contrarily, you might pull back your spending and limit the things you want to do in retirement in fear you’ll spend assets down too quickly. With a solid legacy plan, you’ll know what you can spend today while being intentional about what you leave behind.

MITIGATING THE RISKS TO YOUR RETIREMENT

In addition to long-term care planning, learning the ins and outs of Medicare and setting aside room in your budget for health care costs, a solid retirement plan positions your assets in a way that gives you flexibility to generate the income you need while also mitigating risks by positioning your assets correctly.

While every plan will be a little different, here’s generally how you’ll want to position your assets in a retirement plan for living longer:

Cash Reserve: In retirement, you’ll want a pool of cash that you can tap as income. Typically, your reserve is about two years’ worth of income, although it may be more or less depending on your situation.

A cash reserve helps protect against market volatility. This money isn’t affected by market downturns. Your cash reserve provides a cushion to generate income for up to two years without having to worry about this risk.

Guaranteed Income: This is money from Social Security, pensions or income annuities. We call it guaranteed because it comes to you on a regular basis no matter how long you live and it is unaffected by the market. Typically, it’s a good idea to have enough guaranteed income to cover essential expenses like food, utilities or other recurring bills.

Guaranteed income protects against longevity risk and market volatility. Guaranteed income won’t be affected by market volatility and it helps protect you from running out of money in retirement should you live longer than you expect.

Traditional 401(k) or IRA: These are investments in a tax-deferred account (this could also include 403(b) or other similar account). You won’t owe any tax on these accounts as their value grows, which helps you build your nest egg even in retirement.

Your 401(k) or similar accounts protect against inflation. By keeping some of your money invested, a portion of your income has potential to grow at a pace that matches or, hopefully, exceeds inflation.

Roth Accounts: These investments also grow tax free. Even better: Because your money was taxed before it went into a Roth, you won’t owe any taxes on distributions.

Your Roth account protects against taxes and inflation. The investments in your Roth account will continue to grow, helping to protect against inflation, and distributions are tax free. Using a mix of traditional and Roth accounts can allow you to create more income without crossing into higher tax brackets.

Whole Life Insurance: The cash value of whole life insurance will grow over time no matter what’s happening in the market. In addition, as long as the policy is intact, whole life insurance will pay a death benefit to your beneficiaries someday.

Whole life insurance protects against market volatility and legacy. Your cash value is essentially another cash reserve (that’s likely to grow more than money sitting in a checking account) because you can access it during down markets. In addition, the death benefit will allow you to be more deliberate about your legacy.

Traditional Investments: These are investments over and above what you have contributed to tax-advantaged accounts like 401(k)s and Roths.

Traditional investments protect against inflation. On any given day, markets are volatile. But over time, stocks, bonds and other investments have proven to provide long-term growth. That’s important to a retirement plan because you’ll want to give yourself a raise over the course of what could be a 20-year retirement. Investments help you keep up as prices rise over time.

While this may seem like a lot, a financial advisor can help you build a plan to accumulate and position your assets for retirement. He or she can then help you strategically withdraw from your accounts when you get to retirement.

1 Health Care Cost Institute 2017 Health Care Cost and Utilization Report.

2 LongTermCare.gov, Who Needs Care?

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