Longevity Challenge: Planning for a Retirement That Could Last 30 Years
When Margaret retired at age 65, she felt well prepared. She and her husband had saved carefully, owned their home, and had a combined Social Security income that covered their essential expenses with a little left over. Their investment accounts would handle the rest. The plan looked solid.
What she had not fully accounted for was time.
Margaret is now age 81. Her husband passed four years ago. The inflation of the last decade has quietly eroded the purchasing power of every fixed dollar in her monthly budget. Her healthcare costs have shot up. In fact, some expenses have doubled since she retired. And the investment accounts that were supposed to last her lifetime have been drawing down faster than projected, because she and her husband had originally built the plan around a 30-year horizon.
Margaret did not make dramatic mistakes. She made a single quiet one: she planned for a retirement that was shorter than the one she is actually living. She is not alone. And the data suggests this planning gap is far more widespread than most people realize.
The Longevity Gap in Retirement Planning
Americans are living longer than at any point in recorded history, and most people are still planning for a shorter retirement. U.S. life expectancy at birth reached 79 years recently, its highest level ever, according to final mortality data from the U.S. National Center for Health Statistics. At age 65, retirees can expect an average of nearly 20 (or more) years of retirement.
Those are averages. For a couple retiring at 65, the probability that at least one partner reaches 90 is higher still.
Why a 30-Year Retirement Changes Everything
A retirement that lasts 30 years is not simply a longer version of a retirement that lasts 15. It is a fundamentally different financial challenge.
In a shorter retirement, a relatively straightforward withdrawal strategy, drawing down savings at a modest rate while collecting Social Security, may be sufficient. In a 30-year retirement, the compounding effects of inflation, healthcare cost escalation, sequence-of-returns risk, and portfolio depletion interact in ways that can overwhelm a plan that was not specifically designed for a long horizon.
The Allianz 2026 Annual Retirement Study found that 67% of Americans now say they worry more about running out of money than they do about dying, up 10 percentage points from 57% in 2022.
Gen Xers, the generation now entering the retirement red zone between ages 55 and 65, are the most anxious at 73%. That anxiety is not unfounded. Research from Nationwide and the American College of Financial Services found that extending retirement by five years, from 30 to 35 years, increases the risk of depleting a nest egg by 41% based on historical returns.
The plan that works for a 25-year retirement does not automatically work for a 35-year one.
The Four Risks That Compound Over Time
Planning for a long retirement requires a specific understanding of the risks that grow more dangerous the longer retirement lasts.
Inflation
Inflation can the most insidious because it is invisible on a month-to-month basis. A monthly expense of $4,000 at age 65 becomes approximately $5,400 at age 80 under a 2% annual inflation rate. At 3%, that same expense approaches $6,200. A retiree whose income is fixed while their costs continue to rise is experiencing a real reduction in purchasing power every single year, even if their account balance appears stable.
Duration of Risk
Longevity itself is a risk in the specific sense that it extends the duration of every other risk. A healthcare cost shock is far more damaging to a depleted portfolio at age 85 than the same cost at age 70 when the portfolio was larger and recovery time remained. The longer the retirement, the more opportunities there are for something to go wrong.
Sequence of Return Risks
Sequence-of-returns risk is particularly concentrated in the early years of retirement. A significant market decline in the first five years of a 30-year retirement can permanently impair the portfolio’s ability to sustain withdrawals across the full horizon.
Healthcare Costs
Healthcare cost escalation is the fourth compounding factor. The figure tends to grow as retirement lengthens, both because overall healthcare inflation consistently outpaces general inflation and because the intensity of care typically increases in later years.
The Layers of Income Longevity
The response to a 30-year retirement horizon is not simply to save more, though more is rarely harmful. It is to build an income architecture specifically designed for a long, uncertain timeline.
Sustainable retirement income for a multi-decade horizon typically involves two functional layers working together.
A Predictable Income Floor
Social Security, any pension income, and annuities can work together to cover essential monthly expenses.
Social Security, optimized through a claiming strategy suited to individual circumstances, is generally the most widely accessible source of predictable income.
Annuities can also help address longevity risk, offering income designed to last for life. It’s important to evaluate the role of an annuity within an individual’s full financial picture.
Portfolio Withdrawals
Portfolio withdrawals are typically used to fund discretionary spending and support long-term growth, drawing on retirement savings accounts (such as 401(k)s and IRAs) alongside income-producing investments, including dividend-paying equities, fixed income instruments, and structured income vehicles.
These instruments do not eliminate market risk but can reduce the dependence on asset sales to fund monthly expenses.
For those who retire before claiming Social Security, bridging that income gap without prematurely depleting an investment portfolio is a planning consideration worth discussing with a financial professional.
Building a Plan That Lasts
“The clients who navigate a long retirement more successfully are not necessarily the ones who had the most money at 65,” says Rafe Klein, Senior Vice President, Investments at David Lerner Associates.
“They have a plan that was built for a long horizon from the start, that accounted for inflation, for healthcare, for the possibility of living to 90 or beyond. That kind of plan looks different from one built for 15 years and the time to build it is well before you need it.”
Margaret eventually restructured her income plan at age 78, shifting more of her remaining assets toward income-generating vehicles and reducing her dependence on portfolio withdrawals. It was harder to do than it would have been at age 65. But it was not too late.
The question every investor over age 45 should be asking is not just how much they will have when they retire. It is how long that money will need to last. Want to get an idea of how long your savings will last? Use our retirement calculator.
Material contained in this article is provided for information purposes only. It is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities. These materials are provided for general information and educational purposes, based on publicly available information from sources believed to be reliable. We cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. The subject of this article is fictitious and created for illustrative purposes only. It is based on events of a similar nature and should not be interpreted as a direct depiction of any specific individual, organization, or incident. Any resemblance to actual persons, living or deceased, or actual events is purely coincidental.