longevity risk

Longevity risk is the chance that a person will live longer than expected, which can lead to financial challenges in retirement. For example, if someone plans for their savings to last until age 85 but they live to 95, they may outlive their resources. This risk affects individuals, insurers, and pension plans because they need to ensure funds remain available for a longer period. Managing longevity risk involves strategies like annuities or diversifying investments to provide income stability throughout an extended life span.