How to Mitigate Longevity Risk in Retirement

Published July 14, 2017
Increasing lifespans and a recent shift in the US retirement system from employer pensions to accumulation strategies has created new challenges for Americans planning for retirement. Learn how to mitigate longevity risk and create guaranteed retirement income that will last as long as you do.
  • In lieu of employer pensions, workers are now encouraged to accumulate assets, without proper guidance on how to spend it during retirement
  • With no guarantee, many Americans’ retirement savings are subject to market volatility
  • The Personal Pension is the next best option to the employer pension, and offers retired individuals guaranteed income that lasts as long as they do

Longer lifespans are posing a challenge for everyone: if you retire at 65, how can you know if you have enough money to live comfortably until 90 or longer? How do you know when to retire so that you have enough money for a long, healthy retirement? There are two important strategies to consider in order to achieve this: 1) finding a way to mitigate longevity risk, and 2) utilizing retirement saving products that create guaranteed retirement income that lasts a lifetime. 

The Retirement Planning Challenge Facing Americans

Along with increasing lifespans, there is a recent shift in the U.S. retirement system: instead of being offered pensions in retirement, which provide guaranteed retirement income, workers are now encouraged to accumulate assets, without proper guidance on how to spend it during retirement and without a guarantee. This adds a new complication to mitigating longevity risk and leaves Americans without much guidance as they plan for retirement. 

According to the Employee Benefit Research Institute, only 7% of private sector retirement plan participants are provided a pension, while 69% were participating in a 401(k)-like contribution-based plan. In a defined contribution plan, including 401(k)s, employees are responsible for selecting where their retirement savings are being invested and how much money they’ll be saving. In addition to managing everything that comes with day to day life, this puts the burden on workers to manage their retirement savings.

mitigate longevity risk

Although it has some benefits, such as greater investor choice and reaping returns from market upswings, your hard earned retirement savings can take a hit in market downturns. Then, when you are finally ready to retire, your 401(k) won’t turn into a guaranteed stream of income. How you withdraw your investments is entirely left for you to determine and has the potential to not last as long as you do.

Mitigate Longevity Risk with the Personal Pension

The Personal Pension works for you to mitigate longevity risk. Unlike an income annuity where you pay all at once, you make contributions to the Personal Pension with as little as $100 a month over your working life, each of which increases your pension check. By making contributions to your Personal Pension over time, you develop a portfolio of guaranteed income available in retirement. You can put away money towards your Personal Pension just like you would into your 401(k) or IRA accounts, but instead of investing in the market, your savings go directly towards a pre-determined income stream in retirement.

How Can I Start a Personal Pension?

Blueprint Income offers a Personal Pension account with the lowest minimum, $5,000. After opening an account, you can make these subsequent contributions with as little as $100.

Here you can see what contributing to a Personal Pension will guarantee you in retirement income. After just a few years in retirement, you’ll have recouped your initial investment, and the rest will be profit.

You can continue with the enrollment process on your own or fill out the information to have one of our specialists follow up with you by starting with the Personal Pension Builder, where you’ll be able to set a goal for how to grow your pension over time. Note that all future contributions are optional, but it’s always great to have a goal.

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Nimish Shukla

Nimish Shukla

Financial Planning Professional

Nimish has spoken with thousands of customers about retirement spending. As a CFA Charterholder and licensed fixed annuity producer he values the importance of building an income stream for retirement. In addition to his work at Blueprint Income he is also a regular contributor to Nerdwallet.