What is longevity risk, and how does it affect retirement income?

Longevity risk is the chance that you will live longer than expected and run out of money as a result. It is not a market crash or a sudden bill. It is the quiet possibility that your savings and income streams do not stretch far enough to cover a retirement that lasts longer than anyone planned for.

For retirees and pre-retirees in Cary and across the Triangle, this risk is worth understanding because the area's strong healthcare access and generally manageable cost of living can support longer lives. If retirement ends up lasting 25 or 30 years instead of the 20 you assumed, the math changes on everything from withdrawals to taxes to Medicare costs. This guide explains what longevity risk means, how different income sources handle it, and what factors change the picture.

What is longevity risk?

Every financial plan for retirement has an assumed time horizon. You save and invest based on how many years you think the money needs to last. Longevity risk is what happens when reality stretches beyond that assumption.

The Social Security Administration's period life table, based on 2022 data and used in the 2025 Trustees Report, shows that at age 65, men can expect to live roughly 17.5 more years on average, and women about 20 years. Those are averages. About half of people turning 65 will live longer than that, some well into their 90s or beyond. A plan built around 20 years of income may not hold up for 30.

Recent North Carolina life expectancy data from the CDC and the state's State Center for Health Statistics puts life expectancy at birth somewhere around 75 to 77 years in recent reports, recovering after pandemic-era declines. That number is an average at birth, not a retirement planning target, but it gives a general sense of where things stand. Wake County tends to rank above the state average. Even so, life expectancy at birth tells a different story than life expectancy at age 65, which is the number that matters more for retirement planning purposes.

How longevity risk interacts with common retirement income sources

Not all income sources respond to longevity risk in the same way. Some are built to pay for your entire life. Others depend on how much you withdraw and how long the balance holds out.

Social Security pays a monthly benefit for as long as you live. It is not tied to a personal account balance, so it cannot run out because you lived too long. It also includes cost-of-living adjustments each year to help benefits keep pace with inflation. For many retirees, Social Security forms a baseline that longevity risk cannot erode on its own. In North Carolina, Social Security benefits are not subject to state income tax, which means more of each monthly check stays in your pocket regardless of how long you collect.

Pensions from a former employer may also provide income for life, depending on the plan terms. Some pensions include annual cost-of-living adjustments, and many do not. A pension without inflation protection pays the same dollar amount in year 25 as it did in year 1, which may buy considerably less over time. Survivor options matter too. Choosing a joint-and-survivor payout typically reduces the monthly amount but extends some income coverage to a spouse after the pension holder's death. The details of your specific pension plan are what count here, so it is worth reading the summary plan description carefully.

Annuities can provide guaranteed lifetime income, but only certain types do. A fixed immediate annuity, for instance, converts a lump sum into monthly payments that continue for life. A deferred annuity with a guaranteed lifetime withdrawal benefit works differently. The question for longevity risk is whether the income lasts for your entire life or runs out at some point. Annuity terms, fees, and the financial strength of the issuing company all matter. If you are considering an annuity, a licensed insurance professional can explain how different contract structures handle the risk of a long life. You can also read our annuity basics guide for a general overview of how annuities work.

IRAs, 401(k)s, and other investment accounts do not pay income for life. They hold a balance, and you draw from that balance over time. The longer you live, the more years of withdrawals the account needs to cover. The IRS requires minimum distributions from traditional IRAs and qualified plans starting at age 73, using life expectancy factors from Publication 590-B. Those required minimum distributions can help ensure the account is drawn down over time, but they also mean the balance declines whether or not you need the money that particular year. If you live past what the IRS tables assume, you may still need income after the account has been drained.

The interaction between these sources is where most of the practical planning happens. Social Security and any lifetime pension or annuity income form a floor. IRAs and 401(k)s fill in the gap above that floor. The bigger the guaranteed floor, the less an extended lifespan threatens the overall plan. But individual details, including age, health, other assets, household structure, and tax situation, all change the math.

What can change the answer

Several factors influence how much longevity risk affects a given household:

• Personal health and family history. A 65-year-old in good health with long-lived parents may need to plan for more years than the actuarial average suggests. Someone managing serious chronic conditions may have a different planning horizon. These are personal factors that general articles cannot answer.
• Healthcare access. The Triangle has three major health systems: Duke Health, UNC Health, and WakeMed. Access to specialists and routine care can support longer, healthier lives, but healthcare costs tend to rise with age and can put pressure on a fixed-income budget. Medicare plan choices, supplemental coverage, prescription drug costs, and out-of-pocket planning all connect to longevity in ways that matter over a 25-year or 30-year retirement.
• Inflation. Over two or three decades, even modest inflation erodes purchasing power. Income sources without built-in inflation adjustments, such as fixed pensions, some annuities, and bonds paying a set rate, fall behind over time. Social Security's annual cost-of-living adjustment helps but may not fully match rising costs, particularly for healthcare spending.
• Cost of living in your area. North Carolina's overall cost of living generally falls below the national average, which can help retirement income go further. But it varies within the Triangle. Cary, Chapel Hill, and parts of Raleigh tend to run higher than some surrounding communities. Housing payments, property taxes, and local healthcare costs all play a role, and they tend to rise over time.
• Tax treatment. In North Carolina, Social Security benefits are exempt from state income tax. Other retirement income, including pensions, annuity payments, and IRA or 401(k) withdrawals, is generally subject to the state's flat income tax rate. The longer you live and the longer you take distributions, the more years you pay taxes on that income. A licensed tax professional can help you understand how state and federal rules interact with your specific income mix, since the answer is different for every household.

Longevity risk vs. sequence of returns risk

People sometimes confuse these two risks, but they are different problems with different causes.

Longevity risk is about how long you live. If you live longer than expected, your savings need to stretch further than planned. Sequence of returns risk is about when bad investment returns happen. If the market drops early in retirement while you are also taking withdrawals, the damage compounds in a way that a similar drop later in retirement would not.

Both can threaten retirement security, and they can overlap. Someone who lives to 95 and experienced a major market downturn at 67 faces both at once. But they call for different kinds of thinking. Longevity risk is partly addressed by income sources that pay for life, like Social Security or certain annuities. Sequence of returns risk is partly addressed by how withdrawals are managed and how a portfolio is structured. Neither risk can be eliminated, and neither has a universal solution. If you want to read more about sequence of returns risk, we cover that topic in a separate guide.

Questions to ask a licensed professional

If longevity risk is on your mind, here are some questions that can start a useful conversation with a financial professional, tax adviser, or licensed insurance agent who can review your particular situation:

1. Based on my age, health, and family history, how many years should I realistically plan for retirement income?
2. What portion of my income comes from sources that pay for life, and what portion depends on account balances that could be depleted?
3. If I live to 90 or 95, does my current income plan hold up, or does it come up short?
4. How do required minimum distributions from my IRA or 401(k) interact with my other income and my tax picture over time?
5. Does the age I claimed Social Security, or the age I plan to claim, affect how well my income covers a long retirement?
6. What happens to my income if my spouse passes away first, or if one of us needs long-term care?
7. Are there income sources I have not looked at that could add a lifetime layer of security?

These are starting points, not prescriptions. What makes sense depends on your specific age, income, health, household, tax situation, and comfort level with risk. No article or online calculator can tell you what to do. A licensed professional who reviews your full picture can help you think through the trade-offs.

Next steps

Longevity risk is one piece of the retirement income puzzle. Understanding how your income sources interact with a potentially long life gives you a better foundation for the decisions ahead, even if the exact answers depend on details only you and your advisers know.

You can explore more guides on retirement income topics , including Social Security timing, pension payout options, RMDs, and inflation. You can also browse the Medicare and Social Security section for how those programs work together. If you have a question about something covered on this site, or something that is not covered yet, the Ask a Question page is the best place to start.

CaryFixedIncome.com is an educational resource for Cary and Triangle-area residents. We do not provide financial, tax, legal, insurance, or investment advice. Nothing on this site should be taken as a recommendation for your specific situation. For guidance tailored to your circumstances, speak with a licensed professional in North Carolina who can review your complete financial picture.