EP Wealth Regional Director, Ryan Serrecchia, CFP®, shares strategies for planning around a longer retirement and managing long-term care costs to rethinking investment and tax approaches.
When I sit down with clients to build a retirement plan, one of the first questions we work through together is: how long should we plan for? It's a question no one can answer with certainty, but the trend line is clear. The latest numbers show that U.S. life expectancy at birth has reached 79 years—a record high—and life expectancy at age 65 now sits at roughly 20 years, meaning the average 65-year-old retiree can expect to live to approximately 85. For individuals with access to quality healthcare and the resources to maintain an active lifestyle, the horizon may extend well beyond that.
What this means in practical terms is that a 25- to 35-year retirement is not unusual. While some people assume their expenses will decrease once they stop working, that isn't always the case. Healthcare costs, long-term care needs, and inflation can all push expenses higher in the later years of retirement—sometimes significantly.
A retirement plan designed 10 or 15 years ago may not account for these realities. Whether you're still working and building toward retirement or already drawing from your savings, it can be worth stepping back to consider whether your plan reflects the life you're likely to live. Here are some of the areas I focus on with clients when we plan for a longer retirement.
Many people look forward to retiring early, but doing so can create financial strain over a longer retirement. The longer you work—whether at your current job or in a so-called "encore" career—the longer you can postpone taking money from your retirement accounts or collecting Social Security.
Early retirement is all well and good, but not if it means you’ll need to worry about money for the rest of your life.
By not taking Social Security until age 70, you can increase your payout by approximately 8 percent per year beyond your full retirement age. Depending on your birth year, that could mean receiving up to 124 to 132 percent of your monthly benefit by waiting until 70. There is no additional benefit to delaying past that point, as the amount no longer increases.
Beyond the financial side, there's another reason some people want to remain in the workforce. For many older adults, concerns about cognitive decline—including Alzheimer's and other forms of dementia—weigh heavily. In some cases, working longer could keep you productive and may support your mental health. Staying engaged and active helps keep the mind elastic, while also providing supplementary retirement income.
Fully funding a 401(k) or IRA is a strong foundation, but contribution limits on employer-sponsored plans and IRAs cap how much you can set aside each year. For individuals with higher incomes who are planning around a longer retirement, those limits may leave a gap between what you're saving and what you'll eventually need.
Building savings across multiple account types—pre-tax, after-tax, and tax-free—may give you more control over how and when you draw income in retirement, which can matter for both tax planning and cash flow management. Some vehicles and strategies worth discussing with your advisor include:
A financial advisor can help you evaluate which combination of savings vehicles may be appropriate given your income, tax situation, and time horizon.
A financial advisor can help you account for each of these risks as part of a long-term retirement plan.
Over a longer retirement, how you draw income from your retirement accounts—and in what order—can make a meaningful difference in both your tax situation and how long your savings last.
Under the SECURE 2.0 Act, the starting age for required minimum distributions is now 73 for individuals born between 1951 and 1959, and will increase to 75 for those born in 1960 or later. While that gives retirees more time before mandatory withdrawals begin, it can also mean larger account balances when distributions start—which may push you into a higher tax bracket.
If you're required to take RMDs but don't need the income right away, there are ways to keep those funds working for you. For instance, your advisor can help you transition RMD proceeds into a brokerage account or other investment vehicle so the money continues to have growth potential while you remain in compliance with distribution requirements.
For retirees who have a mix of account types—pre-tax, taxable, and Roth—there's a strategic question about which accounts to draw from in a given year. In a lower-income year, it may make sense to draw from pre-tax accounts to fill up a lower tax bracket. In a higher-income year, drawing from Roth or taxable accounts could help you avoid pushing into a higher one. Thinking through this on a year-by-year basis, rather than pulling from one account type by default, can affect both your annual tax bill and how long the overall portfolio lasts.
For some retirees, the years between retirement and the start of RMDs may present an opportunity for Roth conversions: moving funds from a traditional IRA or 401(k) into a Roth account, paying taxes at current rates, and allowing future growth to occur tax-free. This can be especially relevant for individuals who expect their tax bracket to rise later in retirement once RMDs, Social Security, and other income sources begin to stack up. The right approach depends on the individual's full financial picture, but it's a strategy worth evaluating during that window.
Long-term care can be one of the largest and least predictable costs in a longer retirement. Whether that means in-home assistance, an assisted living facility, or a nursing home, the costs add up quickly. Medicare generally does not cover ongoing daily care—it covers short-term rehabilitative stays, but not the kind of sustained support that many people eventually need. That means the expense typically falls to the individual.
I encourage clients to start evaluating their options well before care is needed, when health and age are still working in their favor. There are several approaches to consider with your advisory team. Which one is most suitable depends on many factors, such as your age, health, assets, and preferences.
Regardless of the approach, the earlier you begin evaluating your options, the more flexibility you're likely to have.
Even outside of long-term care, healthcare expenses tend to increase as retirement goes on. Medicare premiums, supplemental coverage, prescription costs, and out-of-pocket expenses can all add up—and for higher-income retirees, Medicare's Income-Related Monthly Adjustment Amount (IRMAA) can result in significantly higher premiums.
When we build long-term cash flow projections for clients at EP Wealth, healthcare cost assumptions are a key input. Factoring in healthcare inflation—which has historically outpaced general inflation—can help provide a more realistic picture of what later retirement years may look like financially.
A retirement that could span three decades or more may call for a different investment approach than one designed for a shorter horizon. Some retirees shift too quickly into conservative allocations early in retirement, which can limit growth potential at a time when the portfolio still needs to support decades of spending.
There's a balance to consider. Maintaining some level of equity exposure may help the portfolio keep pace with inflation over a longer time frame, while also managing the sequence-of-return risk that can affect portfolios in the early years of retirement. Guaranteed income sources—Social Security and pensions where available—can serve as a baseline of income that isn't dependent on market performance, which may allow the rest of the portfolio to remain invested with a longer-term perspective.
An investment strategy built for a longer life should be revisited regularly, not set once at the point of retirement.
A longer life also affects how you think about your estate. Assets that were originally expected to pass to heirs may need to support the owner for longer than initially planned, which can change the calculus around gifting strategies, trust structures, and beneficiary designations.
For clients who want to support family members or charitable causes during their lifetime, coordinating those goals with a realistic view of their own longevity is important. Working with both a financial advisor and an estate planning attorney can help align estate planning decisions with the full scope of your financial picture.
A financial plan is typically not a one-time exercise. Tax laws are subject to change. Markets may shift. Healthcare costs could evolve. Your own goals and circumstances may look different five years from now than they do today. At EP Wealth, we revisit plans with clients on a regular basis, adjusting projections and strategies as new information comes in.
Planning for a longer life is less about getting everything right on day one and more about building a framework that can adapt over time. The earlier you start—and the more consistently you revisit the plan—the better positioned you may be to enjoy the full length of the retirement you've worked toward.
If you'd like to explore how your retirement plan accounts for a longer time horizon, contact an advisor at EP Wealth to discuss where you stand and identify areas that may benefit from a closer look.
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