Living to 100: How to Protect Your Nest Egg From Longevity Risk

Jenny Lou Faber |

When you imagine retirement, you might picture relaxed mornings, more time with family, travel, or pursuing hobbies you’ve always loved. But there’s one question that often gets overlooked: What if you live longer than your money lasts?

This is known as longevity risk—the chance that you’ll outlive your retirement savings. While living longer is a blessing, it comes with financial challenges if your nest egg isn’t prepared to stretch over 30 or more years.

What Is Longevity Risk?

Longevity risk is simply the possibility that your savings won’t last as long as you do. It’s not just about daily living costs like groceries, property taxes, or utilities—it’s also about late-in-life expenses such as healthcare, memory care, or in-home assistance.

Healthcare is often the wild card. In fact, studies show that the last six months of life can be some of the most resource-intensive and expensive

For example, long-term memory care facilities can run thousands of dollars each month, and these costs often rise faster than general inflation.

 

Why People Underestimate It

Many people assume they won’t live as long as they might. Maybe their parents passed away relatively young, or they feel “healthy enough” not to worry. But advances in medicine and lifestyle changes mean people are living longer than previous generations. For married couples, this risk doubles: women tend to outlive men, and the surviving spouse may face years of additional expenses on a reduced household income.

 

Misconceptions About Retirement Costs

The biggest misconception isn’t usually about how long people live, but about how much aging costs. Medical expenses, assisted living, and memory care often cost far more than people anticipate.

Healthcare in particular is extremely “back-loaded.” Studies show that the last six months of life can be some of the most resource-intensive and expensive1. In fact, nearly 40% of all end-of-life healthcare costs occur in just the final month of life1. Those unexpected late-stage expenses can severely deplete even a well-prepared nest egg.

Inflation adds another layer—healthcare costs often rise at a rate higher than general inflation, steadily eroding the purchasing power of retirement dollars.

 

 

Preparing Your Portfolio for a Long Retirement

The good news? With proper planning, longevity risk is manageable. Here are a few strategies financial planners often recommend:

  • Balance your asset allocation. Funds you won’t touch for many years can be invested with growth in mind, while near-term funds should be kept more conservatively.
  • Leverage income streams. Annuities, pensions, and Social Security can act as “longevity insurance,” providing lifetime income to cover essential expenses.
  • Delay Social Security if possible. Starting benefits at 62 locks in a lower payment. Waiting until your full retirement age—or even age 70—can increase your monthly payout significantly, which pays off if you live longer than expected.
  • Factor in inflation. Consider investments that can keep pace with or outgrow inflation, such as dividend-paying stocks, mutual funds, or inflation-protected securities.

Don’t Forget Legacy Goals

For many, it’s not just about making sure money lasts for themselves—it’s also about leaving something behind. Whether you want to provide for family, give to charities, or set up trusts, structuring your assets thoughtfully (and tax-efficiently) makes a big difference. For example, Roth IRAs can be passed on tax-free, while traditional IRAs generally are taxed as income to heirs.

 

Overcoming the Emotional Barriers

Talking about longevity risk isn’t just a financial exercise—it’s an emotional one. It can feel uncomfortable to discuss mortality, the potential loss of a spouse, or the possibility of needing advanced care. Some people dismiss it entirely, thinking, “That won’t happen to me.”

But having these conversations—and putting a plan in place—can actually bring peace of mind. As one of our advisors put it, the best advice: he holds up his hand with fingers outstretched and says “Five words: Have a plan.”

 

The Takeaway

Longevity risk isn’t something to fear—it’s something to plan for. By preparing your portfolio, considering healthcare and inflation, and clarifying legacy goals, you can enjoy the retirement you’ve envisioned without worrying about outliving your savings.

If you’d like to explore how to structure your retirement plan for a long, fulfilling life, our team is here to help.

 

Sources:

1 https://pmc.ncbi.nlm.nih.gov/articles/PMC11140868/