How to Age-Proof Your Retirement Plan

 

How to Age-Proof Your Retirement Plan

Longevity risk is a big threat to your retirement, but there are several strategies to protect yourself from running out of money, no matter how long you live.

By Steven Orlowski, CFP, CNPR

You’ve saved diligently, planned carefully, and now retirement is finally in sight—or maybe already underway. But one risk looms larger than ever: outliving your money. Thanks to medical advancements and healthier lifestyles, many retirees can now expect to live well into their 80s, 90s, and even beyond 100. While that’s great news for your lifespan, it’s a serious challenge for your retirement plan.

This is what’s known as longevity risk—the possibility that you’ll outlive your savings. The good news? There are several powerful strategies you can use to age-proof your retirement, so your money lasts as long as you do.

1. Delay Social Security Benefits

One of the most effective ways to secure guaranteed income for life is by delaying your Social Security benefits. For each year you delay beyond your full retirement age (up to age 70), your benefit increases by about 8%. That’s a permanent raise for the rest of your life—and potentially your spouse’s as well if you’re the higher earner.

2. Consider Lifetime Income Annuities

Annuities often get a bad rap, but single premium immediate annuities (SPIAs) or deferred income annuities can provide guaranteed income for life, much like a pension. These are especially helpful if you’re concerned about market volatility or simply want to ensure a consistent monthly check, no matter how long you live.

3. Adopt a Dynamic Withdrawal Strategy

Instead of the old “4% rule,” consider a flexible withdrawal approach that adjusts your annual withdrawals based on market performance and your remaining life expectancy. This allows you to reduce withdrawals in down years and increase them when markets are strong, helping preserve your portfolio over time.

4. Use Bucketing to Manage Risk

A bucketing strategy divides your retirement assets into three time-based categories:

• Short-term (0–3 years): Cash or money markets for predictable expenses.

• Mid-term (3–10 years): Bonds or conservative investments for income and moderate growth.

• Long-term (10+ years): Stocks or growth-oriented investments for inflation protection and longevity.

This approach ensures that you're not forced to sell volatile investments during a downturn to cover immediate needs.

5. Don’t Ignore Inflation

Even low levels of inflation can erode purchasing power over a 30-year retirement. Consider:

• Keeping a portion of your portfolio in equities for long-term growth.

• Purchasing TIPS (Treasury Inflation-Protected Securities) or I Bonds, which adjust for inflation.

• Ensuring that your income sources (pensions, annuities, Social Security) have cost-of-living adjustments when possible.

6. Plan for Long-Term Care

A long life often comes with increasing health costs. Long-term care—whether at home, in assisted living, or in a nursing facility—can drain your savings quickly. Options to prepare include:

• Long-term care insurance or hybrid life/long-term care policies.

• Setting aside a dedicated portion of savings for future care needs.

• Exploring Medicaid planning with the help of an elder law attorney.

7. Reevaluate Regularly

Retirement is not a "set it and forget it" phase. Review your financial plan annually to adjust for:

• Changes in spending.

• Market performance.

• Health status.

• Tax law changes.

Staying flexible and informed allows you to course-correct early rather than face a financial crisis later.

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Final Thoughts

Longevity is a gift—but it also requires foresight. By incorporating strategies to protect against running out of money, you can shift your focus from fear to freedom in retirement. After all, the goal isn’t just to live a long life—it’s to live one that’s secure, comfortable, and on your own terms.