What are Longevity Goals?

Of all the different goal types, longevity goals are probably the least intuitive. They are based on the possibility that you will live longer than you expect.

That sounds great, but your income plan needs to be able to fund those years of retirement (unless you plan on hustling Pinochle when you’re 90).

We find that the majority of longevity goals typically fall into three categories:

1. Financial Independence
2. Housing
3. Healthcare

Financial Independence

Your ability to be financially independent in retirement largely depends on how long you live. A retirement income plan that accounts for 30 years is great unless your retirement winds up lasting 40 years (which is happening more and more these days).

Life expectancy is one of the trickiest parts of financial planning. We can look at actuarial tables and come up with dates when you should pass away with given levels of certainty, but those are nothing but statistical estimates.

Statistics work best for large pension funds and life insurance providers. The group of people those entities cover is so big that they tend to end up looking like the historical averages. They may be off a little bit, but overall, the actuarial tables are probably going to do a pretty good job of predicting what will happen.

But you’re not a statistic. You have no way of predicting which side of the median life expectancy you’ll fall on.  You can’t be “mostly dead” – you’re either alive or you’re not.

And when you are alive, you need to be able to support yourself with either your reliable income or your investment portfolio. That being said, these estimates are a decent place to start – you just need to keep in mind that they’re a starting place.

A big part of sorting through your longevity goals is based on your health and that of your family. If you’re in good shape and all your relatives lived until they were 95, you should probably plan on a long retirement. If everyone in your family has died by 75, there’s a possibility you won’t need to plan for as long of a retirement (although under-preparing is a dangerous game to play).

But these things are never carved in stone. We all know stories of people who drank like a fish and smoked two packs a day yet still lived past 100. We also know people who exercised regularly, ate only the healthiest food and passed away at 60.

Healthcare

Regardless of your life expectancy, as you get older, your healthcare expenses are likely to go up. Older people tend to incur more medical expenses – doctor’s visits, prescriptions, walkers, wheelchairs, scooters, etc. And they’re also more likely to need long-term care (LTC), which can get incredibly expensive incredibly fast.

Housing

As you age, your housing needs are likely to change as well. While (most) people want to live in their homes throughout retirement, that may not always be possible. There are all sorts of options for housing as you age, but they are all pretty pricey. And even if you can live in your own home, you may need to make some modifications so that it meets your needs.

Just like everything else, your housing needs later in life are uncertain. But you need to have access to the resources to meet these challenges.

For some people, this might mean you have a large reserve fund you can dip into to pay for everything. For other people, it might mean having relatives you can move in with. Everyone’s situation is different, and there’s no right strategy for dealing with longevity issues. You need to decide what works for you.

Your financial plan needs to account for all of these possibilities. We don’t know what will happen in the future, but we can at least make educated guesses about the possible outcomes. You don’t know how long you will live or what your later years will look like, but you know you must provide for them. The goal is to be comfortable and have the resources to handle whatever challenges come your way.