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None of us can predict how long we'll live. And yet, as you chart your long-term financial goals, you'll at least want to think about longevity - because it's a key factor in developing appropriate savings, investment and retirement strategies.

For starters, make an educated guess about how long you might reasonably expect to live, taking into account your own health-related characteristics and your family's health histories. You might also want to consult with an actuarial table.

You might be surprised at the results. With advances in medicine and greater awareness of healthy lifestyles, we are living longer than ever before. In fact, half of the 65-year-olds alive today will likely live beyond age 83, according to the Centers for Disease Control.

In short, you may need to plan on spending two, or even three, decades in retirement - a possibility that affects some important areas, including the following:

  • Risk tolerance - Your individual risk tolerance helps determine the investments you choose. In other words if you are risk-averse by nature, you may be more inclined to invest in fixed-income vehicles, such as bonds or Certificates of Deposit, that may offer greater preservation of principal but less chance of capital appreciation. Or, if you don't mind taking on a higher degree of risk to your principal in exchange for potentially higher returns, you may be drawn more to stocks. But if you believe that you are likely to live a long life, you may need to step outside your natural risk tolerance to choose a diversified mix of investments that offer the growth potential you need to stay ahead of inflation along with sufficient income during your retirement years.
  • Social Security - You can begin collecting Social Security at age 62, but your monthly checks will be larger if you wait until your full retirement age, which can be anywhere from 65 to 67. For every year past your normal retirement age that you delay collecting benefits, you'll get "bonus'' payments, which can be substantial. Once you reach 70, you'll have earned the largest monthly payment you're going to get. So, you can use your projected longevity as one important factor in determining when you should start collecting Social Security.
  • Retirement income - Once you retire, you will need to decide when to start taking money from your 401(k) or other employer-sponsored retirement plan. You'll also need to decide how much you should take each month. And you'll need to establish a sensible withdrawal plan for all the other investments in your portfolio. These decisions hinge, in part, on about how long you think you are going to live. For example, if you plan to retire at 65 and you believe you will live another 30 years, you will want to withdraw less money per year than if you thought you were going to live another 20 years.

Get help with "number crunching"
It's not always easy to incorporate one's longevity into financial strategies. So, you may want to consult with a qualified financial professional - someone with the experience and technology to provide you with a number of savings/investment scenarios, based on different life expectancies. It's always a good idea to become familiar with the possibilities that lie ahead.

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