Longevity

  • Increasing life expectancy will affect how much you need to save.
  • A longer investment horizon opens up a range of investment options.
  • A prudent withdrawal rate can extend the life of your retirement income.

Today's increasing life expectancies mean you could easily spend two to three decades or more in retirement. While your savings must last longer, you also have a longer time horizon to put your money to work for you.

Plan to thrive

Today, there is a 50% chance that a 60-year-old man will live to 84 or older, and that a 60-year-old woman will live to at least age 87. For a 60-year-old couple, the odds are even better; there's a 50% chance that at least one person will make it to 91 or older.1 And if retirement savings have to last longer, they also have to bear the brunt of inflation for a longer period of time.

At an annual inflation rate of 3%, the purchasing power of your money would be cut in half in about 25 years. A retired couple with living expenses of $72,000 today would need approximately $146,000 to maintain the same lifestyle in 25 years.

NFLATION: THE IMPACT ON EXPENDITURES
Inflation: The Impact on Expenditures
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A financial advisor can help you consider investment strategies with the potential to increase your returns at a rate that outpaces inflation — helping position you for a long, rewarding retirement.

Consider a range of investment options for retirement and longevity

The upward trends in life expectancies mean that the total investment horizon is longer than you may have planned for. The good news is that this offers you more flexibility in the types of investments you can consider.

Withdraw wisely

How much you withdraw from your savings can have a big impact on your assets. If you withdraw too much over many years of retirement, you could be at risk of outliving your savings. The more conservatively you withdraw, the longer your savings could last. Conversely, taking too little from your savings could mean you don't enjoy the retirement you worked so hard to achieve. A conservative withdrawal rate of 4% to 5% is generally considered to be prudent for the long term.

Maximizing your IRA - 10 years
Withdrawal rates
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Tips for making your money last
  • Know what you have saved for retirement and how much you need to live each month.
  • Work with your financial advisor to determine when to take money from which accounts, and in what order, to help reduce the overall effect of taxes and maximize your account value.
  • Run a projection on our retirement planning calculator to see how long your money will last under many different market scenarios, and adjust your portfolio accordingly.

The longevity story is good news, but it raises a lot of questions. What investments are appropriate for the lengthened span? Which income sources can you tap into first? How conservative should you be with your withdrawal rate? An Ameriprise financial advisor can help you find the answers and carefully plan for a long and enjoyable retirement.

1 Source: Society of Actuaries' Annuity 2000 Mortality tables. Copyright 2009 by the Society of Actuaries, Schaumburg, Illinois. Posted with permission.

Do not use this information as the sole basis for investment decisions; it is not intended as advice designed to meet the particular needs of an individual investor.

Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC.