Hey everyone, Tony Leonardi, your Certified Financial Planner® from Newtown, Connecticut. Welcome back to another episode of *A Smarter Way to Retire*, because there really IS a Smarter Way to Retire.
It's February 6th, 2026 here in snowy cold Newtown, Connecticut — it's Super Bowl weekend. The Patriots are back in the big game, and we're thinking about the long game today — literally. Today we're diving into longevity risk: outliving your money and how to prevent it.
Advances in healthcare mean many of us will live to 90, 95, or even beyond, but if your plan only lasts to age 85, that's going to be a problem. We'll stress-test traditional retirement models, spot the inflection points where longevity becomes a threat, and most importantly share actionable strategies to ensure that your money lasts as long as you do.
By the end, you'll have a checklist to bulletproof your plan for decades.
A Real $1.8 Million Longevity Wake-Up Call
Let me tell you about Joan, she's age 62, she has about $1.8 million saved in her nest egg, and she's getting ready to retire soon. She came to me and said, Tony, I'm planning on having my money last through age 85 using the 4% rule. I ran a calculator online. I think that should be plenty. I think I'm in pretty good shape.
So I said, let's test that theory. We ran her plan through her Monte Carlo simulation and updated with some longevity data. At age 85, she indeed has a 92% probability of success. But if we stretch that plan out to age 95, her probability drops down to 68%. And if we go to age 100, 45%. If she makes it to age 100, she outlives her money in over half of the scenarios.
Joan was a little shocked by that. She said, well, you know, the average life expectancy is around 80. So shouldn't I be fine with 85? Well, that's true. That is the average. But that means half the people live longer than that. And people with family histories like hers — her mom lived to 98 — we should really be planning for the upside.
So we adjusted her plan. She now has a 95% probability of success at age 100 and she feels much more comfortable. That's the power of addressing longevity risk early. Small tweaks now can make a big difference over the long haul.
Why Longevity Risk Is Rising in 2026
Longevity risk, simply put, is the chance of you outliving your savings. And that risk is bigger now than ever with life expectancy stretching out and what seems to be more and more volatility in the markets. U.S. life expectancy is around age 79 on average, but for healthy 65-year-olds, you can expect 85 to 90 life expectancy for men, 88 to 95 for women. One in four will live past age 95. And remember, volatility in the markets is your biggest enemy in retirement.
What served you well as you were accumulating your nest egg suddenly turns on you when you start to spend down your assets, and it can get very ugly very fast if you're not careful. Traditional retirement models using the 4% rule assume a 30-year retirement and with no volatility. It's a straight-line calculation. We all know that the real world can be quite volatile.
You have to factor volatility into your model. But if you retire at age 65 and live to 100, that's a 35-year retirement — five years more than the traditional 4% model plans for. Plus inflation and volatility can quickly drain your accounts.
Inflection Points to Watch
Here are some of the inflection points to be aware of. Around age 80 to 85, healthcare costs tend to spike, averaging about $315,000 of additional expenses per couple. Make sure that's included in your model. Around age 90, sequence of returns risk from early bad markets starts to catch up with you — you can have quite a bit less in your accounts than you expected.
Long-term care can start to eat into 50 to 70 percent of your savings if you're uninsured or self-insured. Something else to be concerned about. If you ignore these risks, your safe plan can fail. The good news? Stress-testing reveals the threats, lets you see where the risk is, and gives you a chance now to fix them.
Stress-Testing Traditional Models
Traditional retirement models like the 4% rule work for 30 years most of the time, but this is a very simplistic approach that doesn't reflect the real world. Life doesn't work in a straight line. For longevity planning, keep these items in mind.
Run Monte Carlo stress-tests with extended life expectancies. Stress-test your plan out to age 100. See if it holds up. If the probability of success drops below 70%, you have time to make small adjustments now that could have a big impact in the long haul.
Make sure you factor in inflation and healthcare costs. 3% inflation turns a $50,000 expense today into $150,000 30 years from now. Don't forget to add about $10,000 per year in healthcare costs throughout your retirement. That's an extra $350,000 that you're going to need in your plan to help cover medical expenses.
The danger zone in your plan is really years one through 10 post-retirement. That first decade, where longevity compounds with market volatility. One bad decade early on in your retirement, your plan can be under undue stress. All Monte Carlo models that fail are primarily due to early volatility. We know the volatility is coming, we just don't know when, and if you happen to get it early on, your plan can be under undue stress.
We use AI tools to model this out pretty quickly, showing exactly where your plan might break.
Proactive Strategies to Mitigate Longevity Risk: The 5-Move Playbook
So here are the five moves that you want to be aware of to ensure that your financial security is solid for decades to come.
- If you're healthy and you have longevity on your side and a long life expectancy, you may want to wait to take your Social Security. If you wait to age 70, you get an additional 8% annual boost for each year you delay. That could add up to $400,000 or more in additional lifetime income for the average couple. That could make all the difference for you. If you have life expectancy longevity on your side, if you don't, you may want to take Social Security early. It's really a personal decision based on your health and your life expectancy.
- You can use annuities to create a floor of income. Immediate or longevity annuities pay out for your lifetime as long as you live. It's insurance against living too long. And again, if you have a long life expectancy, an annuity can really pay off for you. And it will take a lot of pressure off of your portfolio, off of your other investments to produce as much income.
- Use dynamic spending guardrails, which just means being more flexible in your spending in retirement. If you can cut 10% of your spending in bad years and maybe spend a little extra in the good years when the markets are up, you can boost your retirement success by 15 to 20% over that 30- to 35-year period.
- You can use health savings accounts to help offset the unexpected increase in healthcare costs. Health savings accounts are triple tax-free accounts used to pay healthcare expenses. You can put in $4,150 for a single, $8,300 for a couple each year — an extra $1,000 if you're over 55. Take advantage of that to build a nice healthcare nest egg. It could help take some pressure off of your other savings should a major health issue arise.
- Most importantly, stress-test your plan annually. Rerun your Monte Carlo every year. Adjust for longer life expectancies. Adjust for inflation. Adjust for volatility. Make small tweaks all along the way. It's the key to staying on track. Small adjustments early help you to avoid big surprises later on in life. One Connecticut couple that I'm working with added some annuities and some flexible spending guardrails — their probability of success jumped from 62% to 94% at age 100.
Building an Optimized Portfolio Using Monte Carlo
Building an optimized portfolio using Monte Carlo can be key to your longevity. The most important thing to do early on and throughout your retirement is to optimize your portfolio, your investments. Monte Carlo is a great tool to use to do it. Now Monte Carlo runs thousands of market scenarios, primarily to test your overall retirement probability of success.
But you can also use Monte Carlo to help you test and stress-test your asset mixture portfolio against extended lifespans. It can show you if your current allocation will hold up to age 100, factoring in volatility, inflation, and withdrawals all together over lots of different market scenarios and different market cycles. And the goal is to find the portfolio that's on the efficient frontier, the one that will maximize return for your risk tolerance, or more importantly, the portfolio that will optimize your probability of success statistically.
This is usually done by reducing the volatility in your portfolio by mixing and matching low-correlating assets. It's like putting together a delicious recipe in the kitchen. For Joan, we used Monte Carlo to shift her portfolio: more bonds early on for stability, reduce that volatility. We added risk a little bit later for growth. The results: reduced drawdown risk by 25%, boosting her long-term success to 95%.
Your pro tip is combine Monte Carlo with dynamic allocation. Tilt more conservative in the early years of your retirement when sequence of returns risk is high. And you can get aggressive later when sequence of returns risk is lower. Remember, run your model annually to tweak your approach.
If you have a good financial model, stress-test your plan annually and make tweaks as you go along. You can help improve your probability of retirement success and reduce your odds of running out of money. Don't let longevity risk turn your golden years into worry. Stress-test your model today and every year — because there is a Smarter Way to Retire.
Do you want to see where your numbers stack up to age 100? You can take my free 2-minute retirement readiness quiz and get a copy of my book instantly at LeonardiFamilyWealthcare.com/quiz or book a complimentary 15-minute call with me. I'll run your longevity model with your real numbers and we'll see where you stand. You can find my calendar on my website LeonardiFamilyWealthcare.com. Look for my Contact Me and Calendly tabs.
Thanks for reading. Remember to plan smart, retire happier, and we'll see you next week.
Past performance does not guarantee future results.