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Longevity risk and you

As people get older and retirement approaches, an understandable fear can take hold: Will they outlive their savings? The chance that this could happen is called Longevity Risk.

It’s worth looking at a few of the reasons running low or completely out of money during retirement can be such a nightmare:

  • If you see your funds running low, reducing your standard of living can be a painful, but necessary option. This can mean cutting back on what you enjoy doing (like travel) and even slashing spending on essentials.
  • Retirees might have to return to work just to make ends meet, even when they’re starting to become physically frail.
  • Being short of money in retirement can also mean becoming financially dependent on children or other relatives.

People are Living Longer

Longevity risk has always existed, but it’s arguably a bigger risk these days as people live longer. Consider the following facts:

  • In 1960, the average American had a life expectancy of 70 years old.1
  • By 2016, this figure had jumped to 79 years.
  • With better nutrition and more effective medicines, this trend of greater life expectancy should continue.

It’s Easy to Underestimate How Long You’ll Live

People tend to not realize how long they are likely to live:

  • Individuals over the age of 50 underestimate their life expectancy by between 6-8 years.2

By definition, a large number people will live much longer than the average. Based on actuarial data, Time Magazine noted that a non-smoking 65-year old male in excellent health has a 42% chance of living to age 90.3People Also Underestimate Their Retirement Expenses

Perhaps because they underestimate how long they could live, people also lowball the expenses they could incur during their retired years:

  • In one study 4, a majority of married couples age 65 and older estimated that their total out of pocket healthcare costs during retirement would be between $50,000-$200,000.
  • In fact, for the average couple, the true amount is closer to $280,000.5
  • What this means is that many Americans are simply not prepared for the financial reality of their non-working years.

Addressing Longevity Risk

The good news is that there are things you can do to help address the financial aspect of longevity risk. There are two common ways that individuals can help protect themselves against the chance that they might outlive their savings:

Cash Value: as part of certain life insurance plans such as Whole Life or Universal Life insurance plans, Cash Value can accumulate as you pay premiums. This value can then be tapped into during retirement should the need arise.

Longevity Annuities: in exchange for an upfront lump sum, these products offer predictable monthly payments so long as a person is living. This may be a good option for people concerned they might outlast their retirement savings.

Wellness Beyond Wealth

Financial health is important, but there’s so much more to wellness in retirement. Here are some tips for living the best and longest life possible:

  • Eat Better: Research indicates that a better diet is linked to a longer and healthier life. Think more fruits and vegetables, less sugar and salt.6
  • Exercise: Light intensity activity is associated with less disability later in life. Seniors don’t have to run marathons, but some sort of regular physical activity is recommended.
  • Socialize: According to Harvard University research, people’s satisfaction with their relationships is a better predictor of physical health than cholesterol levels. Loneliness, on the other hand, has been said to be as harmful as smoking or alcoholism.7

1. World Bank, Life Expectancy at Birth, All Countries:”
2. Most Over-50s Underestimate Life Expectancy, FT Adviser, November 28, 2017:

3. Here’s What People Fear Most About Retirement-And How You Can Overcome It, Time Magazine, October 19, 2017:

4. Americans Feeling More Financially Secure, But Many Significantly Underestimate Healthcare Costs, Life Insurance Needs and Longevity, Financial Engines Study Shows, September 7, 2017:

5. If You’re Lucky, This Retirement Expense Will Be Just 280K, CNBC, April 19, 2018:

6. Society of Actuaries, Retirement Health and Happiness, 2017.

7. Good Genes are Nice, But Joy is Better, Harvard Gazette, April 11, 2017:



  • Foresters does not provide financial advice. You should consult a financial professional if you require any financial or other professional advice.416570 US (08/18)
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