Longevity Risk: The Danger of Outliving Your Savings

One of the biggest financial risks in retirement isn’t market crashes or inflation—it’s simply outliving your money. With life expectancy increasing, many retirees will spend 20, 30, or even 40 years in retirement, making it critical to have a plan that ensures their savings last. Without a structured approach, many people run the risk of depleting their assets too soon, leaving them financially vulnerable in their later years.

The challenge with longevity risk is that many people underestimate how long they will need their money to last. Even with a substantial retirement portfolio, factors like market downturns, inflation, and poor withdrawal strategies can accelerate the depletion of savings. Retirees who rely on withdrawals from traditional retirement accounts, such as 401(k)s and IRAs, often face the risk of withdrawing too much too soon, reducing their ability to sustain their lifestyle over time.

Additionally, many retirement plans assume an average life expectancy, but what happens if you live longer than expected? A plan that only lasts until age 80 or 85 may not be sufficient if you live into your 90s or beyond. Without guaranteed income sources, retirees could be forced to drastically cut expenses, rely solely on Social Security, or return to work later in life.

The key to mitigating longevity risk is having a structured income plan that provides financial security for life. Instead of relying solely on investments that fluctuate with the market, incorporating guaranteed income sources can provide stability, ensuring you never run out of money—no matter how long you live. Planning ahead allows you to maintain your lifestyle, protect your assets, and enjoy retirement with confidence.