Why Longevity Planning Matters More Than Ever

Peter Richardson is a vice president of Planning Philosophy and Thought Leadership at Northwestern Mutual.

Living a longer life is something to celebrate, but it also raises important financial questions. As life expectancy increases, so does the need to make sure your money lasts.

That’s where longevity planning comes in. At its core, it’s about preparing for retirement that could last 20, 30, or even 40 years while maintaining your lifestyle, managing risk, and protecting your financial security.

And it’s not just theoretical.

The Centers for Disease Control and Prevention says average life expectancy in the U.S. was 79 years in 2024, up 0.6 years from 2023. If you’ve had access to good healthcare and lived a healthy lifestyle, it could be even longer for you.

Northwestern Mutual’s 2026 Planning & Progress Study shows that 27 percent of Americans believe it’s likely they’ll live to 100. But nearly half (48 percent) believe it’s at least somewhat likely they’ll outlive their savings, and 46 percent say they don’t expect to be financially prepared for retirement.

That shift has real implications and comes with greater risks than may have been anticipated in traditional retirement planning. Unlike some boomers and older generations, many of us working today won’t have a pension to supplement our Social Security income when we retire.

In other words, people are living longer and realizing that their finances may need to stretch further than expected. Let’s talk about what longevity planning is, the main risks of living longer, and how your advisor can help design a plan so you stay comfortable financially.

What is longevity planning?

Longevity planning is the discipline of building a financial plan that can support a range of possible lifespans. It considers retirement income, spending flexibility, inflation, market risk, taxes, healthcare, long-term care, and legacy—not as separate topics, but as interconnected decisions.

If you’ve ever wondered how long your retirement savings will last, you’ve already taken the first step.

Longevity planning vs. retirement planning

Retirement planning often begins with an age, a savings target, and an estimate of future spending. Longevity planning adds a wider lens, exploring what happens if retirement lasts longer than expected, one spouse lives much longer than the other, markets fall early, care costs rise, or taxes change over time.

The biggest financial risks of living longer

Living longer amplifies several key retirement risks. It’s important to talk with a professional who can help you build a plan with solutions designed to protect against the risks. Understanding these risks is the first step toward managing them.

Longevity risk: You outlive your savings

Longevity risk is the possibility that you’ll live longer than expected—and run out of money as the years go by.

This is the central challenge of longevity planning. And it’s becoming more common as life expectancy rises, pension income is less widespread, and retirement periods are extended.

Planning response: Work with a professional who can use sophisticated software to test your plan across several potential lifespans and identify which expenses are essential, which can flex, and which income sources can continue for life.

The risk of failing to manage taxes

Taxes can have a significant impact on how long your savings last.

Different income sources are taxed in different ways:

• Traditional 401(k) and IRA withdrawals are typically taxed as income.
• Roth accounts may provide tax-free withdrawals (if requirements are met).
• Investment accounts may be subject to capital gains taxes.

Planning response: Managing when and how you withdraw funds can help improve tax efficiency—and potentially extend your retirement savings.

Inflation risk: Your dollars lose buying power

Inflation can quietly but significantly erode your purchasing power over time. What feels like a sufficient income today might not cover the same expenses 20 years into retirement.

This becomes even more important when planning for a long retirement horizon, where small annual increases in the cost of living add up.

Planning response: Maintain enough growth potential to support later-life spending while also keeping enough stability so you aren’t forced to depend on markets at the wrong time.

Sequence of returns risk: Your portfolio is hit by market performance

Market performance early in retirement can have an outsized impact on your financial plan. If you experience market losses shortly after you begin withdrawals, it can reduce the longevity of your portfolio.

This is known as sequence of returns risk—and it’s particularly important in longer retirements, where recovery time is critical.

Planning response: Decide in advance which resources may be used during a downturn so you’re not forced to sell long-term investments after a market decline.

Healthcare and long-term care risk: Your care costs increase with age

Healthcare expenses tend to rise with age, and long-term care can be one of the largest and most unpredictable costs in retirement.

The costs and need for care are among the biggest variables in a longevity plan. Estimates from the U.S. Census Bureau indicate that the population aged 65 and older will rise to nearly 80 million by 2045 from almost 58 million in 2022. This is likely to also increase demand for care services.

Even with Medicare, out-of-pocket healthcare costs can add up. And Medicare does not generally cover long-term care—such as assisted living or in-home care—which can be expensive and unpredictable. According to Northwestern Mutual’s What Care Costs study, annual costs for assisted living facilities in the U.S. average $64,920 for a studio, $70,488 for a one-bedroom, and $74,280 for a two-bedroom unit.¹

Planning response: Build a care strategy before care is needed, including where care might be received, who would help make decisions, and which resources would fund different levels of need. Options like long-term care insurance or dedicated savings can help prepare you for these potential costs.

Risks can merge and compound

These risks rarely show up one at a time. A market decline can force withdrawals at the wrong moment. Inflation can make those withdrawals larger. A health or care event can create expenses just when the portfolio has less flexibility. Longevity planning is about designing the plan for how these risks can compound.

Building a retirement plan for a longer life

Once the risks are clear, the plan becomes a set of design choices. These include:

• How much reliable income should cover essential expenses,
• How much growth is needed to keep pace with inflation,
• Which assets can provide liquidity during a market decline,
• How you should manage taxes across decades, and
• How you’d fund care if your health needs change.d

A strong longevity plan asks different resources to do different jobs. Some assets are designed for growth. Some provide reliable income. Some protect against risks. Some create liquidity, tax flexibility, or legacy protection.

Below are some of the many sources to consider when calculating your retirement income. Our financial advisors have access to sophisticated software that can help plan different scenarios.

Social Security

Choosing when to take Social Security is a big part of retirement planning.

With life expectancy increasing, you may consider delaying when you take Social Security as long as possible. But that won’t make sense for everyone and is likely to depend on several factors—including when you retire and your other sources of income.

You’ll also want to consider the risk that Social Security rules and benefits change over time, which could affect your broader retirement income. Your advisor can help determine what’s right for your financial plan.

Other guaranteed income sources

You may already have access to other sources of guaranteed income in your plan, such as pension payments (if available), annuities, or other fixed income solutions.

Withdrawals from savings and investments

Most retirees rely on withdrawals from retirement accounts such as 401(k)s, IRAs, or brokerage accounts.

Common practices like the 4 percent rule—which means withdrawing 4 percent of your retirement savings each year plus inflation—can provide a starting point. But you may need to adjust for things like longer life expectancies, market conditions, and your personal goals.

Life insurance cash value and flexible assets

Certain financial products, such as permanent life insurance, can build cash value over time. Depending on the policy and your situation, value may be accessed through withdrawals, surrenders, or policy loans. Each method has trade-offs: Accessing value reduces cash value and death benefit, loans accrue interest, and poorly managed distributions can create tax consequences or cause a policy to lapse.

The planning question is not simply whether cash value can be used. It is when using it improves your total plan—and when leaving it in the policy better supports your protection or legacy goals.

Passive or supplemental income

Some retirees generate additional income through:

• Rental properties,
• Part-time work or consulting, and/or
• Other passive income streams.

This can help reduce pressure on your investment portfolio and extend the life of your savings.

Research suggests integrating wealth and insurance can produce better outcomes

Research by EY and subsequent Northwestern Mutual modeling have examined strategies that combine investments, permanent life insurance, and income annuities. Under the assumptions tested, integrated strategies produced higher sustainable income, greater median legacy, or a combination of both than the investment-only comparisons. That does not mean every family should own every product or that modeled outcomes are guaranteed. The more useful takeaway is that assets with different risk, return, liquidity, tax, and guarantee characteristics may work better when they are evaluated together and selected for specific goals.

This coordinated view can extend to asset allocation. Northwestern Mutual research refers to the broader approach as comprehensive asset allocation: considering investments, permanent life insurance, and income annuities together while recognizing their important differences in liquidity, guarantees, access, and risk. That does not mean insurance cash value or an annuity is identical to a bond. It means your advisor should consider how the stability and income characteristics of all your resources affect the amount of investment risk you’re able and willing to take.

Longevity and your legacy

Longevity planning isn’t just about making your money last but also what happens after you’re gone. Many of us want to leave something behind for our family when we pass and not use up all our money.

Estate planning can help ensure your assets are distributed according to your wishes, whether that means supporting family members, charitable causes, or your business interests.

This includes:

• Naming beneficiaries,
• Creating wills or trusts, and
• Planning for tax-efficient wealth transfer.

Live a better (not just longer) life

A longer life can expand what is possible—but only if the financial plan is built to support income, manage risk, adapt over time, and protect the people and priorities that matter most.

The measure of a good longevity plan is not whether it predicts the future. It is whether it gives you choices when the future changes.

Working with your Northwestern Mutual financial advisor can help you:

• Estimate how much you’ll need for retirement,
• Build a diversified income strategy,
• Manage risk and uncertainty, and
• Adjust your plan as your life evolves.

Whether you’re still working or approaching the end of your career, planning with a financial professional by your side can make all the difference—and allow you to enjoy your retirement with less stress.

Ultimately, financial longevity isn’t just about how long your money lasts but also making sure you can live the life you want.

Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP^®, CERTIFIED FINANCIAL PLANNER^®, and CFP^® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.

Frequently Asked Questions

What is a longevity plan?

A longevity plan is a financial strategy designed to help your money last long after you stop working—potentially 30 years or more in retirement. It brings together elements like retirement savings, investment strategy, income planning, healthcare preparation, and estate planning. It can include goals you may have to leave money to family or charities.

Rather than focusing on a specific retirement age, longevity planning accounts for the reality that you may live longer than expected.

What is longevity risk?

Longevity risk is the possibility that you’ll outlive your savings, potentially leaving you reliant on government benefits for medical needs, housing, food, and all other expenses. Outliving your savings may leave you unable to leave a significant financial gift to future generations or donate to a nonprofit when you pass away.

As life expectancy increases, this risk becomes more important to plan for. If your retirement lasts longer than expected—or if withdrawals, inflation, or market performance reduce your savings faster than planned—you could run short of income later in life.

Managing longevity risk typically involves diversifying income sources, maintaining a balanced investment strategy, and adjusting your financial plan over time.

What is the average 401(k) balance for a 65-year-old?

Industry estimates suggest an average 401(k) balance for a 65-year-old of about $300,000 and median of about $95,000. But the average 401(k) balance can vary widely depending on income, savings habits, and investment performance.

Some people have saved significantly more, while others have far less. And plans for retirement can vary from relatively inexpensive days spent at home gardening to pricey international trips and maintaining multiple homes. That’s why it’s more helpful to talk with a professional financial advisor and focus on whether your savings align with your personal goals, lifestyle expectations, and expected retirement timeline—rather than comparing your balance to others.