Ensuring that your savings last throughout your lifetime—commonly referred to as longevity planning—requires careful thought and strategy.
For individuals approaching retirement, particularly those with significant wealth, the stakes are higher. Balancing aspirations for an active, fulfilling retirement with the realities of potentially decades-long financial needs is critical.
In this blog, we will explore the factors affecting longevity planning, strategies to help ensure your savings last, and how CKS Summit Group can guide you in crafting a sustainable retirement plan.
The Reality of Longer Life Expectancy
Although longevity has been on the decline in recent years, life expectancy in the United States has increased significantly over the past century. According to data from the Social Security Administration, a man reaching age 65 today can expect to live, on average, until 84.3, while a woman can expect to live until 86.7. Furthermore, one out of every four 65-year-olds will live past age 90, and one in 10 will live past age 95.
These figures highlight the need for retirees to plan for 20 to 30 years—or more—of financial independence. For the wealthy, extended lifespans also introduce greater challenges, such as sustaining their desired lifestyle and managing complex portfolios over an extended period.
Key Factors Influencing Longevity Planning
- Healthcare Costs
Healthcare is one of the most significant expenses retirees face. According to RMAA Solutions, a 65-year-old couple, both non-smokers, both retiring in 2025 and planning to live until age 85 for the female and 83 for the male should plan to incur costs of $319,000 throughout retirement for their healthcare coverage. - Inflation and Cost of Living Adjustments
Inflation erodes purchasing power over time. Even modest inflation rates can significantly impact retirement savings. For instance, with an average inflation rate of around 3%, the purchasing power of $1 million today would be reduced by nearly half in 25 years. - Market Volatility
Wealthy retirees often rely on investment portfolios for income. However, market downturns, particularly in the early years of retirement, can adversely affect portfolio sustainability—a phenomenon known as the sequence of returns risk. - Lifestyle Expectations
A luxurious retirement lifestyle, including travel, second homes, and philanthropy, demands more financial resources than a modest one. Understanding and aligning lifestyle goals with financial resources is crucial. - Longevity Risk
The risk of outliving one’s assets is a genuine concern. While it is impossible to predict exactly how long you will live, longevity planning aims to prepare for the possibility of an extended lifespan.
Strategies to Help Your Savings Last
1. Diversify Income Sources
A diversified income strategy combines Social Security, pensions, annuities, and investment income. Wealthy retirees might also consider trust income, real estate earnings, and dividend portfolios to create a balanced cash flow.
- Social Security Optimization: Maximizing Social Security benefits by delaying claims can significantly increase lifetime payouts.
- Annuities: Certain annuities offer guaranteed lifetime income, reducing longevity risk. It’s important to recognize that all annuities carry some level of risk, making it worthwhile to consult with your financial advisor to determine if they align with your overall portfolio and financial goals.
2. Minimize Taxes in Retirement
Tax-efficient strategies are vital for helping preserve wealth. Consider options such as Roth IRA conversions, tax-loss harvesting, and municipal bonds to help minimize tax liabilities on investment income. Consulting with an advisor can also help optimize tax strategies while ensuring compliance.
3. Incorporate Healthcare and Long-Term Care Planning
Planning for healthcare expenses, including long-term care insurance, is crucial. Self-funding, hybrid insurance products, or leveraging trusts are common strategies among affluent retirees.
4. Build a Spending Plan
Developing a detailed retirement budget can prevent overspending and align expenditures with income. Strategies like the 4% withdrawal rule or dynamic spending models can provide structure.
5. Invest for Growth and Stability
Balancing growth and stability in your portfolio is essential. High-net-worth retirees often adopt a “bucket strategy,” allocating assets into short-term, medium-term, and long-term categories to manage risk and liquidity needs.
6. Estate and Legacy Planning
Wealth preservation includes strategies for transferring assets efficiently. Trusts, philanthropic giving, and gifting can help minimize estate taxes and ensure your wealth benefits the next generation.
The Role of Professional Guidance in Longevity Planning
Given the complexity of longevity planning, partnering with a financial professional can be essential. At CKS Summit Group, our team is committed to helping you navigate your financial journey with trust and transparency.
Our process includes:
- Financial Assessments: Understanding your assets, income sources, and goals.
- Risk Management Strategies: Help you balance market risks with your need for financial stability.
- Retirement Plans: Strategies designed to help ensure your savings last a lifetime.
The Path Forward
Longevity planning is not a one-size-fits-all process—it requires careful consideration of your unique financial situation and goals. Addressing healthcare costs, inflation, market risks, and estate planning, can help you create a robust strategy that allows your wealth to support you for a lifetime.
At CKS Summit Group, we are here to help you build confidence in your retirement plans. Visit summitgp.com to learn more about our services and how we can support your journey toward a more secure and fulfilling retirement.
5 Frequently Asked Questions About Retirement Planning
- How Much Money Will I Need to Retire Comfortably?
The amount needed depends on your desired lifestyle, estimated expenses, and expected length of retirement. A common guideline is to aim for 70-80% of your pre-retirement income annually, but this varies based on individual circumstances. - When Should I Start Taking Social Security Benefits?
The timing of your Social Security claim affects the size of your monthly benefit. While you can start as early as age 62, delaying until full retirement age—or even age 70—can result in significantly higher payments. - How Do I Plan for Rising Healthcare Costs in Retirement?
Healthcare is a major retirement expense. Planning strategies include budgeting for Medicare premiums, considering supplemental insurance, and setting aside funds for potential long-term care needs. - What’s the Best Way to Generate Income During Retirement?
A diversified approach to income, such as combining Social Security, pensions, investment withdrawals, and possibly annuities, helps reduce risk. - How Can I Protect My Savings from Market Volatility?
Managing risk is critical during retirement. Strategies include maintaining a balanced portfolio, using cash reserves for short-term needs, and implementing a withdrawal strategy that helps minimize the impact of market downturns.
Disclaimers and Considerations
While this blog provides educational insights, it is not a substitute for professional advice. CKS Summit Group does not provide investment, legal, or tax advice. For guidance specific to your situation, consult with qualified professionals.
Additionally, any references to specific strategies or products are for informational purposes only and should not be considered recommendations. Please note that past performance does not guarantee future results, and all investments carry risks.
