What If You Live to 100? Planning Past Your Life Expectancy

Life Expectancy Is an Average, Not a Plan

Most retirement plans end at a life expectancy: the age printed on a chart, or the age your parents reached. The trouble is what that number means. Social Security's actuaries put the average remaining lifetime of a 65-year-old at about 18 years for a man and 21 years for a woman, which takes them to roughly 83 and 86. But that's an average. About half of people live longer, and a meaningful share live much longer: by the same tables, roughly a quarter of 65-year-old men reach 90, and a quarter of women reach 92.

A plan that works "to life expectancy" is a plan that works about half the time on that measure alone. The money has to last as long as you do, and nobody knows that age in advance.

This guide uses the RetireOps calculator to answer two questions: how much does a long life cost your plan, and what's the cheapest way to protect against it?

The Example Retiree

• Age: 60, retiring at 65.
• Savings: $1.15M: $750k in a 401(k), $250k taxable, $150k Roth. She saves $30k a year until she retires.
• Spending: $64,800 a year in today's dollars (90% of her current $6,000 a month), plus healthcare.
• Healthcare: $900 a month before Medicare, $425 a month after.
• Social Security: $2,600 a month at 67.
• Life expectancy: 86, about the average for a 65-year-old woman.

Step 1: Read the Second Number

Enter your life expectancy under Personal Information, then look at the confidence panel at the top of your results. It shows two numbers.

• Confidence Score: 96%. The share of 1,000 simulated market histories in which the money lasts to 86. Above the 90% that professional benchmarks use, so this plan looks done.
• If you reach 100: 83%. The same plan, asked to last 14 more years.

The gap between those two numbers is what a long life costs this plan. A plan that is 96% safe to its expected end but only 83% safe to 100 isn't fragile, but it isn't finished either.

Step 2: Watch the Score Fall as the Horizon Stretches

Move the life expectancy slider and the headline score moves with it:

• Plan to 82: 100%
• Plan to 86: 96%
• Plan to 90: 93%
• Plan to 95: 89%
• Plan to 100: 83%

Each extra year asks the portfolio for another year of spending, and it asks at the worst time: late in life, after decades of withdrawals, when a bad run of markets has the least time to recover.

Step 3: What a Long Life Looks Like in a Bad Market

Set life expectancy to 100 and scroll to the Monte Carlo Simulation Results. The fan of outcomes widens with every year: the longer the plan, the less certain the ending.

The middle of the fan stays healthy, around $1.5M in today's dollars at 100. The trouble is the bottom of it. The In a Bad Market card shows how long the money lasts in the unlucky path, the one only one simulated lifetime in ten does worse than:

In a bad market, the money runs out at 93. That's not an exotic outcome. It is an unlucky market combined with an ordinary long life, and both are plausible on their own.

Step 4: Buy Longevity Insurance Cheaply

The calculator makes it easy to test changes against the "if you reach 100" score rather than the headline one. Here is what each change does for our retiree:

• Claim Social Security at 70 instead of 67: 97% confidence, 86% to 100.
• Work two more years, to 67: 99%, 90% to 100.
• Spend $7,200 a year less ($57,600 instead of $64,800): 99%, 92% to 100.
• Spend $3,600 a year less and claim at 70: 99%, 90% to 100.
• Claim Social Security at 62 instead: 94%, 74% to 100.
• Switch to the Spending Smile (+20% to 75): 96%, 81% to 100.

Three things stand out.

Delaying Social Security is the purest longevity insurance. Waiting from 67 to 70 raises her benefit by about 24%, from $2,600 to $3,224 a month, inflation-adjusted and for life. It barely moves the headline score (96% to 97%), because it only pays off if she lives long. That's exactly the point: it costs the most if she dies early, when she won't need the money, and pays the most if she lives long, when she will. Claiming early does the opposite, and drops the live-to-100 score to 74%.

Small spending changes go a long way. Spending $7,200 a year less lifts the live-to-100 score by 9 points. A smaller cut combined with a later claim gets nearly as far while keeping more of the lifestyle.

Front-loading spending makes a long life harder. The Spending Smile spends more in the early years, which leaves less to compound for the late ones. If you plan to spend more early, check the live-to-100 score afterwards.

Should You Just Plan to 100?

Planning to 100 outright is the safest choice, but not a free one. Set our retiree's life expectancy to 100 and the calculator's Reduce Spending card asks for about $5,760 a year less, every year, to get back to 90%. If she lives to 86, that is 21 years of spending she gave up for nothing.

A more balanced approach:

1. Plan to a realistic but generous age. Your own life expectancy, a few years past it if your family lives long or you're in good health.
2. Use the live-to-100 score as the stress test. It should not collapse. If it sits far below the headline score, the plan depends on dying on time.
3. Close the gap with changes that cost little if you die early. Delaying Social Security is the best of these. Keeping some flexibility in late-life spending is another.

For couples the stakes are higher: the chance that at least one of two people lives into their 90s is much greater than for either person alone. See our guide to planning as a couple.

The Takeaway

Your life expectancy is the age you're as likely to outlive as not. Build the plan to a sensible age, then check that it survives a longer one.

1. Read both numbers on the confidence panel, not just the headline.
2. Stretch the horizon and see how quickly the score falls.
3. Protect the long life cheaply: delay Social Security, keep spending flexible, and treat a front-loaded spending plan with care.

How long does your plan last? Open the Advanced Calculator and check the "If you reach 100" score.