Retirements are getting longer because people are living longer. Life expectancy is up across the globe. And that’s a great achievement for society. The challenge is that many people cannot fund that extended time in retirement.

So, now, we’re trying to figure out how to make our money last so we don’t run out of money before we run out of life. That poses many issues for individuals and society as a whole. Longer lives are putting many people at risk of outliving their money.

What’s more is that while people are living longer in retirement, a larger proportion of the population is of retirement age. In fact, the share of the global population age 65 or older is expected to double from 10% to 20% by 2060, according to a November U.S. Census Bureau article titled Global Population Estimates Vary but Trends Are Clear: Population Growth is Slowing. That’s more retirees who are living longer and at risk of running out of money and straining retirement systems to the breaking point.

Many believe that situation has the potential to affect financial stability across the globe.

A worldwide problem

The issue is consequential enough that international leaders discussed it at the World Economic Forum’s annual meeting in Davos, Switzerland, in January.

The World Economic Forum also issued a new report to establish longevity economy principles to establish a foundation for a financially resilient future. These principles aim to raise the profile of the longevity discussion, promoting alignment across sectors in addressing the demographic and financial challenges of global aging and supporting individuals to be resilient in their longer lives. More than 35 organizations, including Allianz, have committed support for the Longevity Economy Principles.

Underfunded retirements are a significant problem in countries around the world. Retirement savings, while typically discussed at the individual level, affect government, business and society at large. It’s good for us to know that world leaders understand that retirement is a key issue across the globe. But let’s focus on what you can do to make sure you are preparing for a long life. Here are three things:

1. Create a written retirement plan.

Retirement is a significant life event — you don’t want to just wing it. Long before you leave the workforce, you want to establish a written retirement strategy. To create that plan, you’ll need to figure out your expected expenses in retirement, take an inventory of your retirement savings and take note of what you want your retirement years to look like. And you’ll want that plan to recognize the possibility that you live in retirement for a long time.

Ultimately, a well-constructed retirement plan will help you achieve the retirement you want. It will help you establish your goals and steps to take to achieve them. It will also consider how you will draw upon your retirement assets for retirement income so that your hard-saved money lasts. A financial professional can help create this plan and keep you on track as you approach retirement and then through your retirement years.

2. Figure out your reliable-income percentage.

It’s important to consider what sources of reliable income you will have in retirement. Reliable income is defined as guaranteed, and sustainable, and I would add increasing income potential from sources such as Social Security, pensions and certain income annuities or annuities with guaranteed income (may be provided through an additional cost rider). It is important for a successful retirement to establish and build up these sources so that you will not outlive your money.

First, you need to assess how much of your essential expenses will be covered by those reliable sources. To do that, you take your reliable income divided by your income need. This number is your reliable-income percentage. Generally, the greater this percentage, the less your income will be affected by various market risks. But you likely don’t want that number to be 100%. These reliable sources of income often lack liquidity and opportunities for growth.

A financial professional can help you determine what percentage of reliable income works for you, your risk tolerance and your financial goals. You can increase your reliable-income percentage by adding financial products like annuities with guaranteed lifetime income benefits to your retirement portfolio.

3. Prepare for various risks to your financial future.

A longer retirement also means more time for risks to derail your retirement strategy. Once you have your baseline retirement strategy, you’ll want to build in contingencies for the various risks to your financial future. You can’t plan for everything, but you can plan for anything.

Over the course of a long retirement, you are likely to experience changes in tax rates, inflation and a down market. All of these risks can deplete your retirement savings sooner than anticipated. So, you’ll want to include strategies in your plan that can protect against these risks.

For example, you’ll want to make sure that you are maximizing your Social Security benefits. This money increases through cost-of-living adjustments (COLAs) over time and is guaranteed for the rest of your life. Depending on your income, up to 85% of benefits may be subject to taxes. However, for married couples, it is really important to plan on how to replace the smaller of the two Social Security benefits when one of the spouses passes away.

You may also want to consider what type of accounts you’re using and which financial products comprise your portfolio. Investing through a Roth 401(k) or Roth IRA can help mitigate future tax risks by paying Uncle Sam now. You can also convert pre-tax funds to a Roth account later on. A financial professional can help you to select financial products that can increase your retirement security by providing guaranteed income and market loss protection.

Lack of retirement security presents a risk to the individuals who may face financial hardship and to society as a whole. What’s concerning is that underfunded retirements are a significant problem in countries around the world. Not having enough money saved for retirement and outliving one’s money is a big financial worry. The majority of Americans (61%) said they fear running out of money more than death in the 2023 Allianz Annual Retirement Study (see note below). With intentional planning, you can ease the fear and create a retirement strategy so that your funds last your lifetime.

The goal is to set yourself up financially so that you can be in charge of your health, wealth, and career through your golden years. If you’re going to spend more years in retirement, you’re going to want to enjoy it.