Question of the Week – What is longevity risk?

We’re getting close to wrapping up our risk series, and today we’re looking at longevity risk.

Longevity risk is the risk of outliving your savings. When you’re planning to retire you try to estimate how much money you’ll need for the rest of your life.

But, how long is the rest of your life? Will you live to 80? 90? Maybe you’ll live to be 100? Longevity risk affects anyone investing to save for retirement because no one can know for certain how long they are going to need to save for.

To combat longevity risk, try and determine how much money you would need for different periods of time. For example, how much would you need for 30 years compared to 40 years. By knowing the difference between even 10 years, it can help you chose more suitable investments and plan accordingly.