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Strategize your spending: Longevity poses one of the biggest risks to your retirement plan, but the manner in which you plan for it will depend on your own, unique financial situation, as well as what you’re most comfortable with when it comes to spending. Some retirees “front-load” by enjoying a higher standard of living early in retirement, then make cuts and shift their spending strategy when needed later on. Others “back-load” by spending less early in retirement to stretch out assets, with the end-goal of not having to reduce standard of living as they age.
Both options require a trade-off, and which ever route you choose will be determined by what kind of budget you’re willing to live on. Ultimately, it all draws back to providing you peace of mind that your assets will stand the test of time, and many of today’s retirees are underestimating their potential longevity.
Narrowing down a number: When it comes to choosing your planning age, there are strategies which aid in providing longevity estimates, such as questionnaires, looking through your family’s history and factoring in your current health. These mortality-related elements, as well as your comfort level with either “front-loading” or “back-loading”, should all be taken into consideration as part of your full retirement plan.
Bottom line: You should look at your life expectancy from a personal standpoint, versus using simple averages, as well as factor in unknown medical advancements that may result in significant impacts to your plan over time.