What is longevity risk?

Longevity risk is the risk of outliving your financial resources. A 65-year-old has a 50% chance of living to 85+ (men) or 87+ (women). For a couple, there is a 50% chance one will survive past 90.

How does joint longevity affect retirement planning?

Couples must plan for the longer-lived spouse. For a 65-year-old couple, there is approximately a 50% probability that at least one will live to age 90. This extends the required planning horizon significantly.

How can longevity risk be managed?

Strategies: guaranteed lifetime income (Social Security, pension, annuity), deferred income annuities starting at 80 (longevity insurance), long-term care insurance, healthy lifestyle to maintain earning capacity in early retirement.

What is a deferred income annuity?

Also called longevity insurance. Pay a lump sum today to receive guaranteed income starting at a future age (e.g., 80 or 85). Provides protection against extreme longevity. Income begins when other resources may be depleted.

How does life expectancy differ from planning horizon?

Life expectancy is the median (50% live longer). For planning, use a longer horizon (90th percentile). For a 65-year-old male, median age at death is about 83, but 90th percentile is 94. Plan to 90-95 to avoid running out of money.

Longevity Risk Calculator for Retirement Planning

Estimate longevity risk in retirement. Probability of living to 80, 85, 90, 95, 100 by age and gender. Planning horizon for a couple (joint longevity). Uses Social Security Actuarial Tables and period life tables.

Principal ($)

Annual Rate (%)

Years

Compounding / Year

$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. Estimate longevity risk in retirement. Probability of living to 80, 85, 90, 95, 100 by age and gender. Planning horizon for a couple (joint longevity). Uses Social Security Actuarial Tables and period life tables. Use the longevity risk calculator result to inform your calculation.

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Longevity Risk Calculator for Retirement Planning

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Frequently Asked Questions

What is longevity risk?

How does joint longevity affect retirement planning?

How can longevity risk be managed?

What is a deferred income annuity?

How does life expectancy differ from planning horizon?