Advances in healthcare and technology mean people are living longer than ever before, which is a double-edged sword for retirees. While a longer lifespan brings more opportunities to enjoy life, it also increases the risk of outliving your savings—a challenge known as longevity risk.
Planning for longer lifespans requires thoughtful strategies to ensure your financial resources last as long as you do. At Envision Retirement Solutions, we help clients develop personalized plans to address longevity risk and support their retirement goals.
What Is Longevity Risk?
Longevity risk is the possibility of outliving your financial resources. This challenge is compounded by factors such as rising healthcare costs, inflation, and the unpredictability of market returns.
Strategies for Overcoming Longevity Risk
- Create a Sustainable Withdrawal Plan
Avoid depleting your savings too quickly by implementing a sustainable withdrawal strategy, such as the 4% rule – though, it should be noted that this is not the most effective withdrawal rate for every retiree. Adjust your withdrawal rate based on market performance and personal needs. - Incorporate Guaranteed Income Sources
Annuities can provide a steady income stream for life, reducing reliance on investment withdrawals. Options include:
- Immediate annuities for instant income.
- Deferred annuities can be considered as a potential tool for addressing future financial needs.
- Plan for Healthcare and Long-Term Care Costs
Healthcare is often one of the largest expenses in retirement. Strategies include:
- Purchasing long-term care insurance to cover extended medical needs.
- Allocating funds specifically for healthcare expenses.
- Diversify Your Portfolio
A diversified portfolio aims to balance growth and risk, with the goal of generating income over time. Include a mix of equities, bonds, and alternative assets to manage volatility.
- Adjust for Inflation
Inflation reduces the purchasing power of your savings over time. Manage inflation by implementing certain strategies, such as:
- Investing in assets with growth potential.
- Using annuities with inflation protection riders.
Common Missteps to Avoid
- Underestimating Expenses: Failing to account for rising costs can strain your savings.
- Ignoring Healthcare Costs: Without proper planning, medical expenses can quickly deplete your resources.
- Delaying Action: The earlier you address longevity risk, the more options you have.
How Envision Retirement Solutions Helps
We help clients overcome longevity risk by:
- Creating personalized income plans tailored to their unique needs.
- Incorporating guaranteed income strategies into their retirement plan.
- Regularly reviewing and adjusting their plans to reflect changing circumstances.
Planning for a Longer Retirement
Preparing for a longer retirement involves structuring your financial resources to align with your future needs. Addressing longevity risk and implementing thoughtful strategies can help ensure your income supports you throughout retirement.
Interested in exploring strategies for a longer retirement? Contact Envision Retirement Solutions today to discuss your financial plan.
