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The Hardest Thing to Plan For in Retirement

By Dan Caplinger – Feb 16, 2014 at 4:12PM

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Retirement planning is tough, but one aspect of it is the most difficult to navigate. Find out what it is.

Planning for retirement is challenging in just about every aspect, from saving enough to investing well and controlling spending. But one challenge stands out as being the hardest to address: the uncertainty of how long you'll live.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at the question of life expectancy and how to plan for it. Dan notes that essentially, unknown life expectancy forces you to plan for all contingencies, inevitably making it impossible to match up spending and saving perfectly. Dan notes that immediate annuities can help you eliminate some of the risk of outliving your money, with AIG (AIG 0.26%), Prudential (PRU -1.38%), and MetLife (MET -0.16%) among the top sellers of products that guarantee lifetime income. But Dan also discusses the challenges of using those products, which can often be hard to understand and laden with fees. Dan concludes that while there's no easy solution, being aware of the problem of longevity risk can help you take early action if you start to run out of money in retirement.

Dan Caplinger owns warrants on AIG. The Motley Fool recommends, owns shares of, and has options on AIG. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

American International Group Stock Quote
American International Group
AIG
$61.69 (0.26%) $0.16
MetLife Stock Quote
MetLife
MET
$75.28 (-0.16%) $0.12
Prudential Financial Stock Quote
Prudential Financial
PRU
$103.29 (-1.38%) $-1.45

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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