This is a post from staff writer Robert Brokamp of The Motley Fool. Robert is a Certified Financial Planner and the adviser for The Motley Fool’s Rule Your Retirement service.

I know it’s the holidays, but I’m going to begin this post with a somber topic: death. I think about it quite a bit, not because I’m morbid, but because it’s one of the important variables in the calculus of retirement planning. After all, your retirement will end at your expiration. The longer you live, the more money you’ll need. A simple calculation indicates that a 65-year-old retiree needing $20,000 a year from her portfolio (apart from Social Security or other sources of income) would need approximately $285,000 saved up… as long as she dies at age 80. However, living to age 90 would require around $420,000. Those numbers jump to $430,000 and $630,000, respectively, if the retiree needs $30,000 annually from her portfolio.

Even kittens want you to save for retirement.

“Where did my savings go?”

Of course, we don’t know when we’ll die, which is why the standard financial-planning recommendation is to assume you’ll live to 90 or 95, to be on the safer side.

I’ll ponder passing even more in about a month or so, as many articles will list the famous people who died in 2012. I always read them, because they often are a mini-tribute to great things some people did (or the tragic mistakes some people made), and I usually find out that there are some people who died whom I hadn’t heard about. But I also read them because they illustrate the broad range of ages at which people pass away.

Consider the people who have met their makers so far this year, along with their ages:

  • Neil Armstrong (82), the first human on the moon
  • Jerry Nelson (78), the voice of Sesame Street’s Count von Count and the Muppets’ Robin and Camilla the Chicken
  • Davy Jones (68) of the Monkees
  • Ron Palillo (68), a.k.a. Arnold Horshack from “Welcome Back, Kotter”
  • Author Gore Vidal (86)
  • Sally Ride (61), the first American woman in space
  • Productivity guru Stephen Covey (79)
  • Whitney Houston (48)
  • Andy Griffith (86)
  • Rodney King (47)
  • Donna Summer (63)
  • Maurice Sendak (83)

This isn’t a representative sample in a statistical sense, but it illustrates that many people die well before their 90s. Most Americans make it to their 70s, many to their 80s, but not as many to their 90s. Of the famous folks who died in their 90s in 2012, there are author Ray Bradbury (91), actor Earnest Borgnine (95), and former Senator George McGovern (90), perhaps best known as getting walloped by Richard Nixon in the 1972 presidential election, but should also be remembered for his piloting a B-24 Liberator in World War II. The numbers tell us that nonagenarians are in the minority.

How long should you plan to live?

It may seem difficult – or even foolhardy – to save a lot of money today for something that (for most people) is many years away, and isn’t likely to happen. Heck, many people die even before they had a chance to retire. Yet the odds of living to 90 may not be as small as you think. According to a report published by the White House, 30.7 percent of 65-year-old women will make it to their 90s; nearly a fifth of 65-year-old men will last that long. Those odds are high enough for me to plan to live to my 90s.

Diligent saving is the surest way to a dignified retirement.

“Yeah, I tapped my 401(k) to buy tuna. But it was worth it.”

Living a long life implies a very long investment horizon, even for retirees, but especially for those who are still working. Consider a 40-year-old who projects he will need $30,000 a year in today’s dollars from his portfolio in retirement, and will live to age 90. Assuming 3 percent annual inflation (the average since 1926, according to Ibbotson Associates), the first withdrawal from his portfolio would be $72,818 in 2042 (assuming he retires at age 70) and $131,517 in 2062 (the year he turns 90). That’s a long time, and a lot of money. It suggests that retiree wannabes need to save quite a bit, and invest in stocks to shoot for potentially higher returns – if they can stand the volatility and uncertainty.

Those numbers also illustrate that retirement isn’t just a single investment horizon (i.e., the day you actually retire). It’s actually a series of 25 to 30 time horizons – each year in retirement — with potentially higher amounts needed for each year. This also suggests that you can take more risk with at least some of your savings, even after you retire.

Now vs. tomorrow

Financial planning is always a balance (nay, compromise) between living for today and preparing for the future – even if that future may not occur. Saving for retirement or college, buying insurance, avoiding or incurring debt even for “investments” such as an education or home – whether you’re doing the right thing is never certain. The best we can do is make prudent assumptions and have a Plan B ready in case the assumptions turn out to be wrong. As for how long you’ll live, you can fiddle with this longevity calculator. It can’t predict your date of death, but it’s interesting to see which factors increase or decrease projected lifespan. Finally, I’ll leave you to ponder this quote from Mohandas Gandhi: “Live as if you were to die tomorrow. Learn as if you were to live forever.”

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