Americans Face a Scary New Retirement Risk — What It Is and How To Prepare
Written by
Gabrielle Olya
Edited by
Zuri Anderson
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Americans are expected to live longer and longer, with the number of Americans living to 100 and beyond expected to quadruple by 2054, according to the U.S. Census Bureau. While this can certainly be viewed as a positive, it does come with a risk to Americans’ retirement preparedness.
According to a new report from the Nationwide Retirement Institute, extending time in retirement by just five years increases the risk of running out of money by 41%, though factoring in lower near-term asset returns increases that risk by more than 300%. And despite these high risks, many Americans are not taking longevity into account when it comes to their saving and investing behaviors.
Here’s a closer look at why increasing longevity is such a risk to retirement readiness, and what Americans can do to counteract this risk.
The Truth About Longevity Risk
Longevity is reshaping retirement as we know it.
“Our research found that 67% underestimated the average longevity of a 65-year-old at retirement, and less than half (48%) factor lifespan into their savings and investment decisions,” said Kristi Rodriguez, head of the Nationwide Retirement Institute.
“Longevity isn’t just a number — it’s a multiplier of other retirement risks,” she continued. “The longer people live, the more they’re exposed to market volatility, inflation, rising healthcare and long-term care costs, and the risk of outliving their savings.”
What Americans Can Do To Prepare for Longer Retirements
The first thing Americans need to do is mentally reframe the way they think about retirement, Rodriguez said.
“Americans need to shift their mindset from just saving for retirement to planning how they’ll live in retirement — potentially for decades,” she explained.
Getting professional advice is a wise way to ensure you’re prepared for a lengthy retirement.
“Individuals should work with a financial professional to build a resilient retirement income strategy that includes guaranteed income, anticipates rising healthcare costs and protects against market volatility,” Rodriguez said.
Even those who are decades away from retirement should start planning for it now.
“For younger savers, the most important thing to do is start saving now,” Rodriguez said. “Make sure you’re leveraging the benefits provided by your employer-sponsored retirement plan and the power of compounding interest over time to grow your nest egg, so you have more money to work with as you approach the end of your career.
“Longevity is a gift, but without proper planning, it can quickly become a financial liability.”
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