The Age of Longevity: Mapping Out Your Future

As life expectancy continues to rise, longevity planning has become an essential yet often overlooked component of a comprehensive financial plan. Ensuring that your savings, insurance, and healthcare funds are aligned with a potentially longer retirement can help safeguard your assets and reduce the impact of unpredictable costs.

Below are several strategies that may help align your finances with a longer retirement horizon.

The Rising Importance of Longevity Planning:

Longer lifespans are reshaping retirement planning. Relying on traditional strategies may no longer be sufficient to meet the financial demands of an extended retirement. Several factors make longevity planning more urgent today:

• Studies show that the number of Americans aged 65 and older will increase from 58 million in 2022 to about 82 million by 2050.
• Projections indicate that 70% of seniors aged 65 will need long-term care service and support.
• Annual care costs for assisted living, adult day health care, home aides, and nursing homes continue to significantly rise nationwide.

Opportunities for Strategic Financial Alignment:

With bond returns experiencing greater volatility, many investors are turning to annuities as a suitable alternative to generate predictable income while reducing exposure to market risk. In addition, recent regulatory changes such as increased 2025 contribution limits, expanded catch-up provisions, and new 529-to-Roth IRA rollover rules provide timely opportunities to grow tax-advantaged income streams.

Convert Pre-Tax Retirement Account to a Roth IRA:

Pre-tax retirement accounts offer tax-deferred growth, but withdrawals are taxed as ordinary income. Converting these accounts to a Roth IRA means paying taxes at the time of conversion, but future growth and withdrawals are tax-free. Roth IRAs also offer the added benefit of no required minimum distributions (RMDs) during your lifetime, allowing your money to grow uninterrupted. Over time, this tax-free compounding can significantly enhance your retirement income.

Optimize Social Security:

Your full retirement age (FRA), which is determined by your birth year, regulates when you can claim your full social security benefit, or primary insurance amount (PIA) from Social Security. You are eligible for reduced social security benefits starting at age 62. Delaying Social Security benefits until age 70 can substantially increase your monthly payments by approximately 8% for each year you wait past your full retirement age. Overall, the average Social Security benefit for retired workers at age 70 surpasses the average benefit at age 62 by approximately $811 per month and $9,726 per year.

However, delaying means you are covering your living expenses with non-social security income or through asset sales – which may be an acceptable option for those with a large nest egg. If you are able to delay and stay financially secure, particularly if you are in good health, this strategy can provide a larger, inflation-adjusted income stream in your later years and improve your financial security in advanced age. 

Spousal Considerations:

For married couples, it’s wise to coordinate their Social Security claiming strategy, especially when there’s a significant income difference. Couples with similar lifetime earnings usually receive more from their own retirement benefits than from spousal benefits.

To qualify for spousal benefits, you must:

• Be married for at least one year
• Have a spouse who is receiving their own retirement benefits
• Be at least 62 years old (or caring for a spouse’s child who is under 16 or disabled)

If your spouse hasn’t filed yet, you cannot claim a spousal benefit. However, you may choose to start your own reduced benefit at age 62 and later switch to a spousal benefit if it is higher once your spouse begins receiving benefits. Keep in mind that filing early may result in permanently reduced monthly payments.

Plan for Healthcare Costs:

Healthcare is often the largest and most unpredictable expense in retirement. By your early 60s, it’s important to assess your coverage options, including employer-sponsored retiree plans, Medicare, and supplemental insurance. Long-term care insurance or hybrid life/long-term care policies can also help manage future expenses. At age 55, if you are eligible you can maximize tax-deductible contributions to a Health Savings Account (HSA), which grows tax-free if used for qualified medical expenses, making it a valuable tool for covering healthcare costs in retirement.

Longevity planning helps ensure that you can live well for longer. By proactively addressing key areas like tax planning, income generation, and healthcare costs, you can build a more resilient and flexible financial strategy. The earlier you begin preparing for a longer retirement, the better positioned you'll be to enjoy those extra years with confidence.

Speak with an Oppenheimer Financial Professional today to learn more.