Why average life expectancy is the wrong target
Life expectancy is an average, and averages hide the spread that creates longevity risk. In the Social Security Administration’s 2023 period life table, used in the 2026 Trustees Report, a man who has reached exactly 65 can expect 18.1 more years on average and a woman 20.7 more, which points to the mid-80s. Yet about half of those 65-year-olds outlive those ages, and the table’s survival counts show 24% of the men and 35% of the women reaching 90.
Couples face a longer horizon still. Treating each spouse’s chances as independent, there is about a 51% chance that at least one of a 65-year-old man and a 65-year-old woman reaches 90, and about a 21% chance that one of them reaches 95. A joint plan has to fund the survivor’s years too, often on one Social Security check instead of two.
Period tables also lean short. SSA builds this one by applying 2023 death rates to the rest of a person’s life, so it includes no future improvement in mortality.
How a long life magnifies other retirement risks
A long life does not just add years; it gives every other risk more time to work. Each extra year is another year of withdrawals, another year for inflation to compound, and another chance for a bad market to arrive. At 3% inflation, prices roughly double in 24 years, so by the end of a 30-year retirement the same budget costs more than twice as much.
Longevity and sequence of returns risk feed each other. A bad first decade shrinks the portfolio just when it still has the longest stretch left to fund. That is why a safe withdrawal rate falls as the horizon lengthens: the historical backtests behind the 4% rule judged 30-year retirements, and an early retiree’s 40- or 50-year horizon calls for a lower starting rate.
Health costs also weigh more heavily late in life, including the chance of needing paid care, which can strain at 95 a plan that looked comfortable at 85. Some households shift part of that risk to long-term care insurance.
Ways to protect against outliving your money
The tools fall into two groups. Some create income that lasts for life, whatever age you reach, which moves longevity risk to a government, an employer or an insurer. Others keep the risk with you but shrink it, by making a portfolio last longer. Guaranteed income costs flexibility and is hard to undo, while a portfolio alone can only be stretched so far, so many retirees use some of each. The main options:
- Delay Social Security. Delayed retirement credits add 8% a year past full retirement age until 70, cost-of-living adjustments (2.8% for 2026) keep the check in step with prices, and the survivor can keep the larger of a couple’s two benefits.
- Take a pension as a lifetime annuity rather than a lump sum where the plan offers a choice.
- Buy an Annuity. An immediate annuity starts paying now; a deferred income annuity starts years later and costs less for the same income, and one timed to begin in your 80s is often called a longevity annuity.
- Use a QLAC, a longevity annuity bought inside a traditional IRA or workplace plan, to cover the oldest ages; its payments can wait until the month after you turn 85.
- Keep spending flexible. Dynamic spending rules trim withdrawals after poor years so the portfolio lasts longer.
- Plan to a late age, such as 95 or 100, and treat money left over as a legacy rather than a mistake.
Common mistakes when planning for a long life
Most longevity mistakes come from treating a lifespan as one known number. A plan tested at a single age cannot show how fragile it becomes a few years later, and the years it leaves out are exactly the ones in which you would have the fewest ways to recover: less ability to work, less time for markets to rebound, and often higher health costs. Four errors come up most often:
- Planning to life expectancy. It is a midpoint, not a ceiling.
- Planning for one person. A couple’s horizon runs to the second death, and from the year after the first death the survivor usually files as single, paying the widow’s penalty of narrower brackets.
- Claiming Social Security at 62 by habit. With a full retirement age of 67, the check at 70 is about 77% larger than at 62, and a surviving spouse’s benefit is built on it.
- Overcorrecting. Spending too little for decades out of fear of a very long life is also a cost.
Illustrative numbers
What a longer horizon costs: $1 million earning a steady 2% after inflation
- Survivors at X
- People alive at age X in a life table, out of 100,000 born
- Survivors at 65
- People alive at 65 in the same table
- p1, p2
- Each spouse’s own chance of reaching age X
The couple formula treats the two lifespans as independent, which is a simplification.
Portfolio at 65$1,000,000
Assumed return after inflation2% every year, spending taken at each year-end
Level spending if it must last to 85 (20 years)$61,157 a year
Must last to 90 (25 years)$51,220 a year
Must last to 95 (30 years)$44,650 a year
Must last to 100 (35 years)$40,002 a year
Stretching the plan from 85 to 95 cuts the spending it can support by about 27%, from $61,157 to $44,650 a year, even with no market swings at all. Real returns vary, so a portfolio-only plan for a long horizon usually needs a lower withdrawal rate or a source of lifetime income.
At a glance
Chance a 65-year-old reaches each age, from SSA’s 2023 period life table (2026 Trustees Report)
| Age reached | Men | Women | At least one of a couple, both 65 |
|---|---|---|---|
| 85 | 44.9% | 56.6% | 76.1% |
| 90 | 24.1% | 34.9% | 50.6% |
| 95 | 8.0% | 14.4% | 21.3% |
| 100 | 1.3% | 3.2% | 4.4% |
Put it in your plan
Longevity risk in MoneyWhatIf
Each adult in a MoneyWhatIf plan has a lifespan you set, and a blank plan starts at 90. A couple’s forecast runs to the later of the two lifetimes, and the first death can end income, move retirement accounts to the survivor and narrow the tax brackets used afterward. Because lifespans are scenario inputs, not predictions, try a What-If that extends yours to 95 or 100 and compare it with the original drawn dashed underneath. Plan Resilience also names the age by which half of any short runs had already failed.
Common questions
Longevity risk FAQs
What is the life expectancy of a 65-year-old?
In the Social Security Administration’s 2023 period life table a man who has reached exactly 65 has an average of 18.1 more years, to about 83, and a woman 20.7 more, to about 86. Those are averages, so about half live longer. The table uses 2023 death rates with no future improvement, and personal health can move the figure a long way.
What age should I plan to live to in retirement?
Plan past your life expectancy. On SSA’s table, a 65-year-old woman has about a 14% chance of reaching 95 and a man about 8%, while for a couple there is about a 21% chance that at least one reaches 95. One way to choose is to pick an age you have only a small chance of outliving, then confirm the plan still works to that age. A Monte Carlo simulation can combine that horizon with market uncertainty.
What is the difference between longevity risk and mortality risk?
They are opposite risks. Mortality risk is the financial harm of dying sooner than expected, when a family loses income it relied on; life insurance is the usual hedge. Longevity risk is the harm of living longer than your savings, hedged with income that pays for life. An early death makes an annuity look like a poor buy, while a long life turns it into a bargain.
Who bears longevity risk in a pension vs. a 401(k)?
In a traditional pension, or defined benefit plan, the employer promises income for life, so the plan carries the risk that retirees outlive its assumptions. In a 401(k) or IRA you carry it yourself: the account is a fixed pot with no promise to last. Taking a pension as a lump sum moves the risk to you; buying an annuity moves it to an insurer.