How to Approach Retirement Planning

Investing, Long Term Care Insurance, Retirement, Roth IRA, Saving

August 11, 2022

Retirement planning is a juggling act where you’re dealing with multiple risks all at the same time. How long will you live? Will the markets tumble early in your retirement? Will you need at-home care at some point, or even move to a care facility (a bigger risk than bear markets later in retirement)?

A recent academic research study says that we’re not correctly prioritizing those risks. They all are important, but the probability of a specific risk occurring—and the costs that it will trigger—are different. The research found that we rank our retirement risks as:

  1. Market risk
  2. Longevity risk
  3. Health risk


But what we perceive as our biggest risks is out of order. The study did a careful analysis of the potential occurrence and impact of each risk and ranked them by their actual impact. Here’s the actual ranking we should all be using:

  1. Longevity
  2. Health
  3. Market


To be clear, all three are very real risks you want to address in your retirement plan. But the study points out what I see all the time: we tend to overlook or underestimate the related risks of longevity and health care costs.

It is nuts we have to focus on either, but that’s how our current retirement system is set up.


Longevity: If you enter your 60s in good health, your retirement plan needs to be based on the assumption you will live at least until 90. Honestly, 95 is better. That’s because there is a not small probability you will in fact live that long. And the last thing you want for yourself—and for loved ones who may someday step in and care for you—is to run out of money.


Health care: Yes, you are eligible for Medicare starting at age 65. But Medicare is not cost-free. There is a monthly premium, and regardless of whether you choose to enroll in Original Medicare or Medicare Advantage, you will typically run into out-of-pocket costs that can cost a few thousand dollars a year.

Okay now that you know, let’s talk about some ways to build more longevity and health care cost protection into your retirement plan.

Save more in retirement accounts.

If your workplace place offers a Roth 401k—most do these days—contribute to that account. In retirement, your withdrawals will be 100% tax-free. The same goes with a Roth IRA.

Plan now for how you might be able to delay starting social security.

You can start collecting at age 62, but if you wait until age 70, your benefit will be 76% higher. That’s a guaranteed rate of return you can’t get with investing. But waiting that long takes planning. Working longer—part-time is likely all it will take—can make it possible. And it can make sense to start drawing down your retirement accounts in your 60s, as a way to avoid having to start collecting Social Security.

Research long-term care insurance.

Yes, it is expensive. But the annual premium is likely no more than the current cost of one or two months of needing care at home, or in a managed care facility. You can learn more at

Take care of yourself!

Exercise and a healthier diet today can set you up for a more enjoyable and potentially less costly retirement. We all know that plenty of diseases are triggered by health choices we make each and every day. And though there are plenty of diseases far out of our control, landing in retirement in the best possible health seems like an obvious win to me. The better you feel, the more energy you have to enjoy retirement. And a healthier you will likely enter retirement with lower health care costs.

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