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Planning for anything is easier when you know what period you are planning for. Unfortunately, no one has a crystal ball to determine how many years they will spend on this earth- far less in retirement.

Even though planning for retirement necessarily involves making some assumptions, the ultimate goal is to avoid outliving your life savings. Since it is better to die with savings than live without, it follows that it is better to plan for as long a period as possible.

Retirement planners state that you should plan for at least 30 years of retirement, particularly if you retire at or before the age of 60. They cite increasing life expectancy and other retirement risks as reasons to plan for 30 years or more. According to statistics by the Life Insurance Marketing and Research Association, those who retire at 50 may live until 86- a period of 36 years. Statistics like that demonstrate the prudence of planning for a longer period.

Once you plan to retire at or after the age of 65, you may have the latitude to use a shorter planning period. Instead of 30 years, you can plan for 20 years. The basic principle of prudence in retirement planning still applies. It is always better to have more than less.

Planning for 30 years of retirement regardless has added advantages. Retirement has greater health risks for retirees who cross 70 years of age. Some retirees may also have financial responsibilities, which can compound other retirement risks. It is important to have a buffer for your retirement savings against the risks of inflation and unforeseen expenses. Planning for a long period better insulates your retirement income and savings against expected and unexpected expenses.

The number of years spent in retirement is not the only factor to consider when planning for retirement. If you use a shorter retirement period, you can still provide a retirement savings buffer by factoring inflation risk after your retirement age. Once you use inflation in assessing your retirement needs, planning for a retirement period of 20 to 25 years might be sufficient. That outstrips planning for a much longer period without considering inflation risk.

Generally, you should cater for 20 to 30 years of retirement. It is more important to plan using inflation, particularly if you plan for a period closer to 20 years. When planning for retirement, you must consider that it is better to die with an estate than struggle to survive.

Learn more about this author, Darrell Victor.
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