What is longevity risk and how should it shape my retirement plan?

Longevity risk is the chance you'll live longer than your money lasts. It's easy to underestimate: for a healthy 65-year-old couple, there's a meaningful chance at least one spouse lives past 90. Planning to only 'average' life expectancy is dangerous, because half of people live longer than average. The main defenses are guaranteed lifetime income that can't run out – maximizing Social Security by delaying to 70, and possibly adding an annuity to cover essential expenses – plus keeping enough stock exposure for growth over a potentially 30-plus-year retirement, and staying flexible on spending. The peace of mind from covering your basic needs with income you can't outlive is often worth more than squeezing out the last bit of investment return. Plan to a long horizon, not an average one.