How to Beat Longevity Risk and Make Your Retirement Income Last a Lifetime

As a financial advisory firm in Houston, TX since the 1970s, we’ve heard this question more times than we can count: Will I outlive my money?

When thinking about financing your Golden Years – whether you’re in them, nearing them or they still seem so far away – this may be the most important question to ponder.

The average retirement age in the U.S. is 62, with a large majority of Americans (63.1 percent) retiring between the ages of 57 and 66. And people in general are living longer. A lot longer. Today, it is reasonable to expect that a healthy adult might possibly live well into their 80s or 90s, and in some cases, even beyond.

You need a financial plan for that.

What this means is that you need a soundly conceived savings plan, because the money you’ve set aside for your retirement needs to be able to cover all of your living expenses: Housing, utilities, taxes, food, healthcare, transportation, travel, etc. And you may need to do this for more than 30 years or more. Running out of money in your retirement, especially in your later years, is a major concern for retirees. Just read our recent blog post: The Most Common Question We Get About Retirement: Can We Make It?

If this happens and you do outlive your retirement funds, what would you do? Sell your home? Go back to work in your 80s? For most people, going back to work after age 80 is not really realistic. 

To determine how much money you’ll need to last your entire lifetime, it’s crucial to measure your longevity risk.

Longevity risk, put simply, is running out of gas before completing the trip, so to speak. And because you never know when you’ll reach the end of your road, you cannot know in advance precisely how much money you’ll actually need, or how long your money will need to last. But here’s one thing you do know: Save too little and live a long life, and you could be priced out of the best assisted living facilities or forced to choose between medications and groceries.

Compounding this challenge, there has been a recent shift away from Defined Benefit (DB) pensions in favor of Defined Contribution (DC) plans, which puts the responsibility to manage risks from longevity, investment and inflation squarely upon the employee rather than the employer.

DB plans give employees a specifically defined benefit – usually an age, average salary and length of service formula. Some DB plans also have cost of living adjustments.

DC plans, on the other hand, give employees a set amount of money each year, or a percentage of their salary. The employee invests from a list of choices set by the employer. The outcome at retirement depends upon how much was saved during the working years and how well it was invested.


Don’t leave your retirement to chance. Talk with the Certified Financial Planners (CFPs) at Linscomb & Williams and establish a plan for your future. The initial conversation is free.


How to Manage Longevity Risk

In our almost 50 years helping families plan for retirement, here are 4 principles we find to be key to managing longevity risk:

  1. Adequacy: Forecast your monthly adequate income requirements in retirement, so that you can plan accordingly.
  2. Information: Stay informed about life expectancy and retirement products and options, not just when you’re about to retire but also long before and even after you retire.
  3. Flexibility: Be able to adjust your plans, products and solutions to compensate for changes to your circumstances (for example, the loss of a spouse).
  4. Sustainability: Make sure your plan is realistic for you to follow, as opposed to being discontinued because it’s too burdensome to your budget.

Putting It All Together

So, what does this all mean and what can you do to make sure you’ll be financially set for life? Well, while there’s no magic formula to follow, we recommend taking these steps:

1. Set realistic retirement savings goals and spending expectations.

Once you decide how much you’ll need to save for your retirement, try to increase it. This will give you a buffer in the event that you live longer than you expect or have higher or additional expenses than you anticipated.

2. Don’t overspend just because.

Don’t buy the most expensive home you can afford. On the contrary, think about retiring to an area where living might be cheaper. (Retirement in Houston, TX, for example, can be less expensive and therefore stretch your money further than if you retired in California.) This even applies in your working years since a house is most likely your largest expenditure. So if you take advantage of the double benefit of living below your means and doing so in an area where the cost of living is lower, you’ll have more money to save for retirement and less of the money you’ve saved that will have to be spent during retirement.

3. Turn your side hustle into a post-retirement gig.

Supplementing your retirement income with newly earned income can provide not only some additional funds during retirement but also something meaningful to occupy your newfound free time. You might turn a woodworking hobby into a small business, for example, purchase and manage an investment property or get a part-time job. This income means less money that you’ll have to spend from your retirement funds.

4. Reduce expenses.

Cutting back before retirement allows you to funnel more into retirement savings during your working years. Cutting back during retirement reduces the amount of money going out, ultimately maximizing the lifespan of your retirement savings. This may include ditching cable, downsizing your home, committing to cooking at home more often (probably healthier!), going out to eat less often and/or canceling unnecessary or unused subscriptions or memberships.

There are many other longevity risk-minimizing strategies than those mentioned here. Discuss your retirement and longevity risk with a fee-only fiduciary financial advisor. Talk with a financial advisory firm in the area where you plan to retire to help ensure you take advantage of special programs and benefits that you may not be aware of.

There is no one-size-fits-all plan or magic-bullet technique that will work for everyone in every financial situation, so be sure to put careful thought into your circumstances before deciding what works best for you.

No matter how long you live, you’ll need adequate funds to finance your life when you are no longer bringing home a paycheck, and with a little thought and planning now, you can better safeguard your financial future. Imagine the peace of mind associated with not having to worry about your retirement.


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J. Harold Williams, CPA/PFS, CFP®

J. Harold Williams, CPA/PFS, CFP®

J. Harold Williams is Linscomb & Williams' Managing Director, Chief Executive Officer and Chairman.

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