Faculty Publications


Planning For An Uncertain Life Expectancy In Retirement

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When figuring out how much to save for retirement or how to withdraw assets during retirement, one of the thorniest issues is not knowing how long the individual is going to live. Living longer than expected, which is often referred to as longevity risk, can increase the likelihood of other risks occurring, driving up certain retirement expenditures such as long-term care costs. For those moving into retirement, this is particularly tricky because part of the planning must include a way to secure an adequate stream of income for an unpredictable length of time. For example, let’s say that you build your retirement plan expecting to live to age 82. However, it turns out that you live to 92. How are you going to make your money last an additional 10 years?