The Economics of Living Longer

by Donna Wright:

Edited and approved by Stephen C. Rose, PhD

Healthy living and medical progress have helped more people reach advanced ages, and the number of Americans living to 100 is rising. According to the U.S. Census Bureau, the centenarian population in the United States increased by 50% between 2010 and 2020.[1]

That sounds like good news, and it is. But it also changes the math. A person who retires at 65 may need income, savings, and health-care planning to last not just 10 or 20 years, but 30 years or more. That is the core challenge of longevity planning.[1,2]

What is longevity planning?

Longevity planning is the financial process of preparing for a longer life. In plain English, it means making sure your money, health-care strategy, and legal documents are built for a retirement that may last decades. It is not a one-size-fits-all plan. The right approach depends on your income, debt, housing, health, family situation, risk tolerance, and goals.[2]

The good news is that longevity planning does not have to start with complicated investing. It starts with the basics: knowing what comes in, what goes out, what could go wrong, and what needs to last.[2,3]

9 practical ways to prepare financially for a longer life

1. Understand your budget now
A long retirement is easier to manage when you already know your monthly cash flow. Consumer Financial Protection Bureau (CFPB) research on older Americans found that day-to-day money management, setting financial goals, and planning behaviors are associated with better financial well-being. Start by calculating your net income, fixed expenses, variable expenses, debt obligations, and savings rate.[2]

2. Build savings that can absorb shocks
Emergency savings matter because financial shocks do not stop at retirement. The CFPB defines an emergency fund as cash set aside for unplanned expenses such as medical bills, home repairs, car repairs, or income loss, and notes that even smaller shocks can create lasting financial problems when savings are thin.[3]

3. Rethink your retirement date
Working longer is not the right answer for everyone, but even a few additional years of earnings can matter. It can shorten the number of years your savings must support, allow more time for contributions, and delay withdrawals from retirement accounts. The CFPB has also reported that unplanned retirement is associated with lower financial well-being in older adults.[2]

4. Optimize Social Security thoughtfully
For many households, Social Security is a core piece of retirement income. The Social Security Administration states that delayed retirement credits increase benefits between full retirement age and age 70, and for many workers born in 1943 or later the credit is 8% per year. That does not mean everyone should delay claiming, but it does mean the timing decision can materially affect lifetime monthly income.[4]

5. Keep inflation in the picture
A long retirement magnifies inflation risk. The Bureau of Labor Statistics notes that as prices increase, the purchasing power of the dollar declines. That means a retirement income plan has to account not just for today’s expenses, but for what those expenses may cost years from now.[5]

6. Plan for healthcare and long-term care
Healthcare is one of the biggest reasons longevity planning matters. Medicare helps with many medical costs, but Medicare does not pay for most long-term care or custodial care. The National Institute on Aging also notes that many older adults end up paying for part or all of long-term care out of pocket, often from savings, retirement funds, investments, or home proceeds.[6,7]

7. Use tax-advantaged health savings when eligible
For people who are still HSA-eligible, a health savings account can be a useful way to set aside tax-advantaged money for future qualified medical expenses. The IRS states that HSA contributions are allowed only for eligible individuals, and that once you are enrolled in Medicare, your HSA contribution limit becomes zero.[8]

8. Consider private financing options carefully
Depending on your situation, longevity planning may include evaluating long-term care insurance, annuities, trusts, or other private financing tools. The National Institute on Aging notes that long-term care insurance, annuities, reverse mortgages, and trusts are among the options some households consider, but the best fit depends on age, health, financial situation, taxes, and family goals.[7]

9. Get your legal and financial documents in order
Living longer does not just require money. It requires organization. The National Institute on Aging recommends preparing and centralizing important financial and legal documents, such as a will, a durable power of attorney for finances, and other planning records, so decisions can be handled if illness, disability, or cognitive decline ever makes self-management more difficult.[9]

A long future should be planned in stages

Longevity planning is not a one-time project. It should be reviewed and adjusted as your career, health, family structure, savings, and retirement timeline change. What makes sense at 40 may not make sense at 60, and what works at 65 may need updating again at 80.[2,7,9]

The bottom line

Living longer is good news only if your financial plan can keep up. That means budgeting clearly, saving steadily, thinking carefully about retirement timing, protecting against inflation, planning for healthcare, and getting your documents in order. The goal is not just to reach older age. It is to reach it with enough flexibility and security to live well.[1–9]

References

U.S. Census Bureau. The U.S. Centenarian Population Grew by 50% Between 2010 and 2020. 

Bureau of Consumer Financial Protection. Financial Well-being of Older Americans; Bureau of Consumer Financial Protection: Washington, DC, USA, 2018.

Consumer Financial Protection Bureau. An Essential Guide to Building an Emergency Fund. 

Social Security Administration. Delayed Retirement Credits. 

Social Security Administration. Effect of Early or Delayed Retirement on Retirement Benefits. 

U.S. Bureau of Labor Statistics. Consumer Price Index Frequently Asked Questions.

Medicare.gov. Long-Term Care Coverage..

National Institute on Aging. Paying for Long-Term Care. 

Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans; Internal Revenue Service: Washington, DC, USA, 2026.

National Institute on Aging. Getting Your Affairs in Order Checklist: Documents to Prepare for the Future.