How Many Years Should You Plan for Retirement?


Planning for retirement is a crucial life phase, but how many years should you plan for in retirement? Ideally, you should prepare for at least 30 years of retirement living. Your financial plan needs to spell out how you will generate enough income for that timespan.

Of course, retirement looks different for everyone, and you may have an idea of how long or short yours might be. Ultimately, it’s very difficult to estimate how many years your money will need to last. You certainly don’t want to run out of income in your golden years. Unfortunately, many people often underestimate how long they will spend in retirement, which can have big effects on their financial security.

Getting this “right” is one of the most difficult parts of retirement planning. That is why it’s better to err on the side of caution and plan for a long-time, post-career span of at least 30 years. Even so, how do you account for this in your income planning? What steps can you take to keep your financial security intact during this extended period?

In this article, we will look at how long retirement can last, what you can do to maintain your financial well-being, and other things to keep in mind.

How Many Years Can Retirement Last for?

A central aspect of retirement income planning is how long your retirement might last. You can’t know for sure how long you might live, so it’s hard to know how many years of spending that you should plan for. However, data from various sources indicates what longevity in retirement might look like.

According to a report by the TIAA Institute, there is a 30% chance that a 65-year-old man will live to at least age 90. For a woman who is 65, the likelihood goes up to 40%. These statistics show how crucial it is to have a long-term planning mindset for retirement.

Underestimating the duration of retirement can have far-reaching effects. The National Retirement Risk Index did some number crunching and found that 47% of working-age households are at risk of being unable to maintain their pre-retirement lifestyle once they retire.

Other studies build on that finding. According to the Employee Benefit Research Institute, four in 10 households are at risk of running out of money in retirement. It’s no wonder why Nobel Prize winner William Sharpe has called the risk of running out of income in retirement as the “nastiest, hardest problem in finance.”

What Can You Do to Plan for Many Years in Retirement?

Everyone wants a financially secure lifestyle in retirement. Of course, that means thinking ahead, creating a game plan, and taking steps so that you can retire and then stay retired.

Here are a few things that you can do for forward-thinking, long-term retirement planning.

Create Detailed Projections of Years of Retirement Living

Get started by putting together full-picture projections for your future spending and income needs. To help keep things organized, you might break down your expenses into two groups:

  • Monthly living expenses – housing, transportation, grocery, utilities, insurance, etc.
  • Non-essential spending – travel, leisure & entertainment, charitable giving, etc.

Remember, it’s ideal to aim for a 30-year timeline, or longer, in your spending projections. What might your spending in retirement look like if you are still working? Or if you are in early retirement, your expenses might look quite different in later years. How can you judge what those numbers could be?

Look at Your Current Financial Picture

An experienced, retirement-knowledgeable financial professional can help you sort this out, but your current spending patterns and income needs are great clue-ins for tomorrow. You form expectations of your lifestyle and how much you need to pay for it around your current household income.

Some of your present expenses will continue in retirement, such as groceries. Utilities and other monthly spending may change if you want to age in place in your present home, or if you wish to downsize or be around others in an active retirement living community. Wardrobe and transportation expenses may go down or disappear if you aren’t traveling for your career anymore. Take some time to think about these potential changes.

Now, what about non-essential spending? You may have some long-held goals that you won’t get to until retirement. Those goals may be personal and different from what your spouse or partner envisions for your retired lifestyle together.

It’s good to engage in open communication now so that you both have an aligned retirement vision and a plan for how to achieve what you wish to do. Start researching what your goals might cost and how you will get the money to pay for them.

Look at Inflation Over Many Years of Retirement

Don’t forget about inflation in your spending projections. Over time, inflation takes a toll on money’s purchasing power. In 1970, the median national price for a newly built home was $23,400. Fifty years later, in 2020, the price went up to $336,00 for a newly built home.

You don’t want inflation catching you unprepared. There are ways to account for a cost of living increase in your spending projections. Assume that your expenses, particularly your monthly living expenses, will go up by a certain amount each year. While inflation has been high in the early 2020s, historical average inflation has been around 2-3%. Adjust your spending projections by 2-3% annually over 30 years, and that will give you a good baseline for being ready.

Map Out Long-Term Income Streams

In retirement, it’s all about the income. Or in other words, income is the primary outcome. You need income sources that will pay you steady income and sustain your lifestyle during retirement. What does your financial picture look like for this?

Your spending projections will give an idea of how much income your investments will need to generate each year. Preferably, your plan will include reliable income sources that pay consistent, steady cash-flow over the long run. One way to look at this is distinguishing between “permanent” and “maybe” income sources.

‘Permanent’ income sources pay stable monthly income, such as Social Security, pensions, and annuities. Your income from permanent sources doesn’t change on a monthly basis.

‘Maybe’ income sources include stocks and mutual funds, which can go up and down in value with market swings. Your income from maybe sources can vary from month to month.

See how much overall income you might expect from your retirement holdings. The numbers from your permanent income sources are more crucial, because they are the monthly income streams you can count on.

Maximize Social Security for Bigger Lifetime Payments

Social Security is a major income staple for most retirees. When you claim them is important, but if you can, waiting to take your benefits can pay off in many ways. Delaying your Social Security benefits beyond full retirement age will greatly boost your monthly payout compared to if you had taken your benefits earlier.

Each year that you wait to take your benefits will let your benefit accrue another 8%. For example, say that your full retirement age is 66 and you wait until 70 (the maximum age to which you can delay). Your benefit will increase overall by 32%, which will greatly increase your monthly paycheck from Social Security.

Of course, this strategy for maximizing your Social Security benefits isn’t right for everyone. Talk to your financial professional, especially if your family or medical history might suggest that claiming early or before full retirement age might be worth it. Just like with waiting, those strategies have their downsides as well, such as reduced benefits payments.

Evaluate Your Pension Options

Take stock of other guaranteed income beyond Social Security. Do you have a pension? You have options for your pension, and guidelines such as the Rule of 85 can help you determine if you can retire with full pension benefits.

You can choose single or joint payouts for your pension. A single payout is a lifetime income stream paid to you. A joint payout is a lifetime income stream paid to you, and then to your spouse once you have passed away. It’s a survivor benefit in that way. There are risks to choosing a survivor benefit with your pension for your spouse, though.

Since you will have a surviving spouse benefit, the payments that you receive during your lifetime will be reduced. What’s more, if your spouse passes away before you do, you are saddled with reduced pension payouts, and the survivor benefit usually can’t be passed to someone else.

Talk to your financial professional about these risks, and what you can do to protect yourself against them.

Explore Annuities and Maximize Guaranteed Income

Annuities are like pensions, but they are even better in some respects. For one, you can customize your annuity to your goals, financial timeline, and other details that matter to you. It’s like a personalized pension plan in that sense.

Most people don’t have pensions these days. Go back to your spending projections. If there is a gap between your monthly living expenses and your permanent income sources, you have to fill the gap somehow.

Consider some of your retirement savings for an annuity. With how insurance companies pool the investment risk of all their annuity owners, and their insurer obligations to make annuity payments to their contract holders, you can actually get more for your money. If you run the numbers with an annuity against other financial instruments, the payout on an annuity tends to be higher than what other options would give you.

What’s more, the income from your annuity is contractually guaranteed. The insurance company must make good on its promise to pay you like clockwork each month. Your guaranteed income stream can last for the rest of your life, or it can be for a set period, like 20 years. Annuities are the only thing beyond Social Security that is available to everyone and that will pay you truly guaranteed income for your lifetime.

Annuities do have some downsides, such as some reduced liquidity compared to that available with various investments and financial instruments. Talk to your financial professional about whether an annuity is right for you.

Plan for Healthcare Expenses Especially in Later Retirement

We will always have expenses tied to our health needs. However, our healthcare spending is likely to go up in later retirement. Statistics show that health changes pick up in the mid-70s and evolve from there.

Healthcare spending is also increasing each year at a faster rate than other areas of spending. If you neglect them, healthcare expenses can drain your wealth faster, especially if your retirement money is in tax-deferred retirement accounts. Each time that you take distributions from those accounts to pay for healthcare, taxes are also due on your withdrawals.

You will want to have the right Medicare coverage and perhaps some insurance products that can multiples of benefits for each dollar of premium put into them. Various annuities and life insurance contracts pay enhanced benefits for eligible long-term care situations, for example. Some hybrid life products are very generous in the long-term care needs that they cover.

That brings up an important distinction: medical care is different from long-term care, and for the most part, Medicare doesn’t cover long-term care. Long-term care can be expensive in itself, so make sure that you explore some of options above, along with long-term care insurance as an option.

Going back to medical care, a Medicare supplement plan may have higher premiums than a Medicare Advantage plan or other Medicare options, but it will shoulder the vast majority of healthcare bills compared to those Medicare plans with reduced coverage.

Talk to your financial professional about your options for health coverage, what might make sense for you, and what insurance products might be available to help mitigate your health and long-term care costs. They can greatly save you money over the long haul.

The Bottom Line on Planning for Many Years in Retirement

Retirement planning is about more than just enjoying your golden years. It’s also about securing them without financial stress. By taking these steps and planning for many years in retirement, you can enjoy a worry-free future.

Preparing for a 30-year retirement timeline as a minimum, you can embark on this new chapter of your life with confidence and peace of mind.

Create projections for your spending needs and the income you will need to pay for your retirement lifestyle. Don’t forget about inflation in your income planning. When you see how much reliable income you have each month for your monthly living expenses, cover any income gaps with guaranteed income from Social Security, a pension (if you have one), and annuities. Consider if a strategy to maximize your Social Security payments by delaying when you take your benefits is right for you. Finally, come up with a game plan for medical care and long-term care spending.

Planning for all of these areas over a long-term timeline will make a difference in your quality of life in retirement. Finding the right financial professional to walk you through it all can also save you time, money, and effort. You might want to work with someone who is independent of any parent financial company, has experience in retirement planning, and knows the issues that you are likely to experience in your golden years.

Are you looking for a financial professional to guide you? You can get started by visiting our “Find a Financial Professional” section, where you can connect with a retirement-knowledgeable financial professional here at Request a complimentary initial appointment to discuss your goals, concerns, and situation. If you want a personal referral, please call us at 877.476.9723.

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