What is Longevity Risk?

Background

Longevity risk is the chance that you live longer than your money lasts. With improving healthcare, many Indians may spend 25–35 years in retirement or more.

Explanation

If you plan only up to age 75 but live to 90, an otherwise reasonable withdrawal rate may fail. Handling longevity risk means using conservative withdrawal rates, testing plans over long horizons and sometimes adding lifetime annuities.

Example

A plan that looks fine with a 4.5% withdrawal rate over 25 years might fail when extended to 35 years. Reducing withdrawals to 3–3.5% and keeping some equity exposure can significantly increase the chance that you never run out.

Try the planner

See how this concept fits your own retirement plan.

Retirement Planner | All Retireopedia terms