Retirement in Bloom: Stability and Longevity

Spring cleaning season offers a natural opportunity to refresh your financial plan. With retirement lasting longer for many individuals, planning for longevity by aligning your savings, insurance, and healthcare strategies can help support long-term financial stability.

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:

Opportunities for Strategic Financial Alignment:

With bond returns experiencing volatility, many investors are turning to annuities as a suitable alternative to generate predictable income while reducing exposure to market risk. In addition, legislative changes, including provisions from the SECURE 2.0 Act, such as expanded catch-up contributions and 529-to-Roth IRA rollover rules provide 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, defines when you are eligible to receive your full Social Security benefit, known as your primary insurance amount (PIA). You can begin claiming benefits as early as age 62, but your monthly payments will be permanently reduced.

Delaying Social Security benefits beyond your FRA increases your monthly benefit by approximately 8% per year (about two-thirds of 1% per month) up to age 70, when benefits reach their maximum.

However, delaying means covering your living expenses with non–Social Security income or by drawing down assets, which may be a viable option for those with sufficient savings. If you are able to delay and remain financially secure, particularly if you are in good health, this strategy can provide a larger, inflation-adjusted income stream later in life and help improve 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:

If your spouse hasn’t filed yet, you cannot claim a spousal benefit. When you file for benefits, you are generally considered to be filing for both your own and spousal benefits, and will receive the higher of the two (subject to reductions if claimed early). 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.