Making sure your money will last in retirement

If you are a millennial looking at saving for retirement, a key factor in your planning is recognizing how long you will need to live on your retirement income and savings -- and that it'll probably be longer than what your parents experience.

Major medical and health advancements have helped boost longevity over the last few generations. Over a millennial's lifetime, there may be more, which could drastically change how long people will be living.

So what steps can you take now to make sure that if your money is prepared to live as long as you do?  

Plan to stay in the workforce longer

Apart from the financial benefits, working longer has also been linked to better health and an increased sense of well being in many older people.  

On the savings side, Fidelity Investments recommends linking a savings goal to your annual preretirement income. So if you plan to have 10 times your preretirement salary saved by the time you retire at age 67, you could begin saving 15 percent of your income at 25 and invest a significant amount (more than 50 percent) in stocks or other high-yielding investments to build your savings over time. If you start saving for retirement later, but still want to retire at 67, increasing the percentage of your income you save can help you achieve the goal. 

The later you retire, the more you can add to your money pile -- and the more time your invested money will have to grow. That longer time horizon could be especially helpful if financial markets do not produce returns as high as they have historically.

Be ready to move as you age

If you buy a house, paying off the mortgage by the time you retire means eliminating those payment costs in later years. But also keep in mind: You may need to downsize, or even eventually move into an assisted living facility. The last few years of a person's life are often very expensive due to health care needs. A recent Merrill Lynch Age Wave survey showed 37 percent of people over 50 believe they may need long-term care during their lifetime, but the reality is that 70 percent will end up needing that kind of assistance.

Costs of such care can be high: The average assisted living facility costs $3,628 per month, or $42,000 per year. And that's now -- costs are generally rising about 3% annually. This kind of custodial care is usually not covered by Medicare. A nursing home, which usually provides higher level medical care, such as vaccinations or physical therapy, and may be covered by Medicare, has an average cost of $253 per night, or $92,345 per year.

"It's a question I always ask: 'What do you find reasonable in terms of longevity?' For the most part, people say they are going to live for a shorter period of time rather than a longer period of time," financial adviser Quentara Costa, who specializes in financial planning for people's later years, told CBS MoneyWatch. "A lot people say '85 or 90,' and some of that adjusts as they age.  Once I have a client in assisted living, usually we're planning about 10 years to bring them from more independent to add-on care plans and then transitioning to a nursing home. A nursing home could only be one, maybe two years."

Women and retirement

For women, retirement poses unique challenges. They tend to live longer than men, are often living alone at older ages, and because of the gender wage gap usually end up with smaller monthly Social Security payments.  About 12 percent of women ages 65 and older were poor, compared with 7 percent of older men as of 2014, according to a recent Population Reference Bureau report.  Among those 75 and older, women are nearly twice as likely to be poor --15 percent, compared with 8 percent of men.

Plant now, harvest later

The most important thing is to start saving early and be aware of how spending habits can impact your ability to live comfortably when you are retired.  Make sure you are maxing out any company matching funds for your 401(k) and also consider putting money into other savings vehicles, such as individual retirement accounts, or IRAs. Push to get your savings rate higher while you are young -- the average American's savings rate is hovering around 5 percent of discretionary income, but most financial experts recommend saving 10 to 15% of your income per year beginning in your 20s and 30s for retirement alone. Starting now can give you peace of mind when you need to rely on that money later in life.