Can you afford to live to 100?

5 ways to start planning for financial longevity now

Published: July 02, 2015 06:00 AM

 How long will you live? It’s a key question in retirement planning—and one many of us answer with an educated guess. If you’re healthy and your family tree has branches with staying power, you might figure that you have decades ahead. You might live to 100 and even beyond. If your parents died early of natural causes, you might assume a shorter life.

Yet research shows genes play a smaller role than most people think in determining longevity. More crucial is behavior. If you are eating better, smoking less, and exercising more than your parents did, there’s a good chance you’ll live longer than they did. So it makes sense to consider that your own retirement may extend 30 to 40 years.

You’ll also need to consider how much money to live on. Although with low expenses you might be able to get away with as little as 55 percent of your preretirement income, we judge that 85 percent of income from your last year of work is about right, based on a survey of recently retired Consumer Reports readers.

So how can you ensure your nest egg’s longevity? Try these smart steps.

Planning to to live to 100? Tell us what financial steps you're taking by leaving a comment below.

1. Put off claiming Social Security

Delaying Social Security is the least costly way to boost income later in life. For instance, folks born in 1949—who are now reaching “full retirement age”—can earn a benefit that’s 8 percent higher each year they delay, up to age 70.

How it works

Delaying your claim shortens the payment period of your benefit, so you get more each month. Conversely, taking Social Security early—you can claim as young as 62—permanently reduces your monthly benefit because payment is stretched over a longer period.

What to know

If you delay claiming Social Security, you risk never getting to use it. But if you’re healthy, it’s worth doing.

Some people think it’s smart to claim early because they’re concerned Social Security will go broke. Indeed, the 2014 Social Security Trustees report says coffers will be exhausted in 2033 if funding and benefit levels stay as they are. But after that, the program could still pay 75 percent of scheduled benefits even without a fresh infusion of taxes, according to the Trustees. Coupled with tax increases to help shore up the system, benefit modifications could be far more modest, suggests Kathy Ruffing, a senior fellow at the nonpartisan Center on Budget and Policy Priorities. Those changes, “carefully crafted to shield recipients with limited means and to give ample notice to all participants, could put the program on a sound footing indefinitely,” she maintains.


At the least, wait to claim until your full retirement age, which ranges from 66 (for people born from 1943 to 1954) to 67 (for people born in 1960 and later). Divorcees, couples with substantial income differences, surviving spouses, and others can use claiming strategies to increase benefits

2. Buy a simple annuity

Consumer Reports’ surveys of retired readers show that having a pension—guaranteed income—correlates with satisfaction in retirement. As traditional pensions disappear, insurers are stepping up their marketing of annuities, which promise pensionlike, lifetime income.

Two types of simple annuity products are worth a look.

With a fixed immediate annuity, you pay a lump-sum premium and get guaranteed, monthly income right away. That could be useful if you need retirement income but want to defer Social Security benefits.

With a deferred-income annuity (DIA), you pay up front or spread premiums over several years; payments begin from two years to as long as 40 years later. Longer-term versions are called longevity annuities. Knowing you’ll have additional, guaranteed income later in life could give you the confidence to spend more earlier in retirement.

How they work

Policyholders who die earlier subsidize those who survive. The longer you defer, the more you benefit, because the annuity has more time to grow.

What to know

You’ll have to pay extra for a DIA that adjusts for inflation. A relatively new DIA type offers dividend income as an inflation hedge but doesn’t guarantee how much.

The Internal Revenue Service exempts up to $125,000—or 25 percent—of retirement accounts invested in “qualified longevity annuity contracts” when determining your required minimum distribution, up to age 85. That means you can delay payouts almost 15 years longer than normal, saving on taxes.


The smaller your nest egg is, the less you’ll want to devote to an annuity, which effectively locks up your savings. Wade Pfau, Ph.D., a professor of retirement income at The American College of Financial Services, warns against spending more than 40 percent of your assets on annuities. But he projects that a 65-year-old could cover all spending after age 85 by devoting 10 to 15 percent of current assets toward purchasing a longevity annuity.

Choose from an insurer highly rated for financial strength by Weiss Ratings, which we’ve found to be more impartial than other ratings agencies. An independent agent can help you obtain multiple quotes.

Avoid the rider for a “cash refund” of premium, payable to your heirs if you don’t use all that you paid in. It effectively negates the financial benefits of the product, Pfau says.

3. Consider long-term-care insurance

Genworth Financial, the largest seller of long-term-care insurance, estimates the average cost of nursing home care in a semiprivate room at $80,300 per year.

You probably won’t end up facing such frightening bills for years on end. The Center for Retirement Research at Boston College estimates that although 44 percent of men and 58 percent of women currently age 65 will need nursing home care at some future time, stays will average less than a year for men and less than 18 months for women. The bulk of care will be provided in the home or another community setting. About half of nursing home and retirement care expenses are covered by either Medicare or Medicaid.

However, assisted living facilities, where the median stay is 22 months and the median cost is $43,200 annually, may not accept Medicaid. And though Medicaid funds some home care, making up the difference can burden your family. Long-term-care insurance can help fill the gap.

How it works

Though you buy a policy based on a monthly benefit, you’re really purchasing a lifetime benefit: a pot of money that can be spent flexibly.

If, for instance, your policy provides for $4,500 per month of nursing care for a total of $162,000 over your lifetime but you use just $3,500 per month in the first year on home-based care, you’ll have more left over to use in a nursing home later. (With a pooled benefit rider, partners can both draw from one pool of funds.)

What to know

A 55-year-old buying $6,000 per month of coverage for a $219,000 lifetime pool of benefits and a 3 percent inflation protection could pay $2,664 per year, says Steve Cain, a principal at LTCI Partners, a long-term-care insurance brokerage. (The policy includes a 90-day elimination period, during which the buyer must pay for care out of pocket.) Single women can pay more than single men. In most cases you lose all benefits if your premiums lapse. And, as with any insurance, you may never use it.


Ask a financial adviser whether you can afford it. The National Association of Insurance Commissioners recommends paying no more than 7 percent of annual income in premiums. “Consumers who look at this usually have assets of $300,000 and up, not including their home,” Cain states. You’ll pay less if you initiate coverage before age 60; Cain says that as a rule of thumb, you’ll pay 6 to 8 percent more each year that you wait.

Base your expected daily benefit on current costs where you plan on retiring, and your lifestyle and budget. Subtract what you can afford per day out of pocket from the daily cost. The longer your elimination period, the cheaper the policy will be; 90 days is the most common.

If possible, buy coverage through a state Medicaid partnership program. If care costs exceed your private-insurance coverage, you don’t have to spend down as much to qualify for Medicaid. Not all states offer the programs; contact your state department of insurance for availability.

As with annuities, choose from among highly rated carriers. And be prepared: Premiums could rise a lot over time.

Consumer Reports' retirement planning guide offers unbiased, expert advice on making the best of your next chapter.

4. Save more, mind your withdrawals

If costly insurance premiums aren’t options, consider changing your lifestyle and expectations.

How it works

Working longer and ramping up savings for just a few years longer can improve your prospects. Say you earn $85,000 at age 59, have $75,000 saved, and get yearly raises of 2 percent. Assuming an annual return of 6 percent, saving 15 percent of your income for five years would grow your nest egg to $175,000 by age 64. Younger investors, of course, have many more options.

What to know

Saving more in your last years of work not only builds your nest egg but also forces you to practice living with less. If you can increase savings by 10 percent and still pay the bills, you will probably need less than the 85 percent earnings replacement rate we recommend.


Work with a financial adviser to draw up a realistic retirement budget and savings withdrawal rate, usually no more than 4 percent of assets.

5. Don’t overlook Medicaid

If there’s a chance that you might need long-term care, whether at home or in a facility, it’s wise to at least know your options through Medicaid.

How it works

Enrollees must be at poverty level—for individuals, around $2,000 in “countable” assets; for couples, $3,000—for at least five years (called a “look-back” period). But individual states may allow for more in assets and for a certain level of monthly income. And a lot doesn’t count toward Medicaid. You won’t have to sell your home if your spouse or certain other relatives are living there; home-equity limits apply. Exempt assets also include retirement accounts, one car, and prepaid burial plots. Be aware that state rules vary.

What to know

Spend-down rules exempt capital improvements that allow you to remain in your home for care. You can expend assets within the five-year period if they’ll be used toward your care.


An elder law attorney can help you transfer certain assets in advance of applying. Michael Ettinger, an elder law attorney based in New York City, recommends an irrevocable, Medicaid asset protection trust (MAPT). Only withdrawals of dividends and interest are permitted.

Editor's Note:

This article also appeared in the August 2015 issue of Consumer Reports magazine.

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