Dear Carrie: A friend recently told me that her financial adviser suggests using age 95 as a life expectancy when planning for retirement. Is this realistic? If so, my wife and I would be afraid to spend a dime. What about living for today? — A Reader

Dear Reader: There’s definitely a delicate balance between spending and saving in retirement, especially as more and more people are reaching their 90s. According to the Social Security Administration, 1 in 4 65-year-olds today will live past 90; 1 in 10 will live past 95. Those are significant odds. But of course, the conundrum remains: Will you be one of them?

When it comes to retirement finances, you’ll hear talk of “longevity risk” — the potential for you to outlive your money. So how do you plan ahead? Most advisers would counsel you to err on the side of caution. You may not be one of the nonegenarians, but if you are, you don’t want to be left penniless and dependent.

That said, there’s a good case to be made for living life to the fullest while we’re still young and healthy enough. After all, as the saying goes, these are the days. For instance, a friend of mine and her husband, both in their 60s, recently bought their dream house. They’re both on the verge of retiring, yet they decided to purchase their dream home. Another couple I know travel as much as they can now while they’re in their late 60s and early 70s, figuring that once they’re in their 80s, they won’t have the same desire or stamina.

These decisions may not follow textbook financial advice, but it makes sense for each of these couples. They’re willing to spend a little more on what’s truly important to them now — even though it may mean cutting back in other areas later — because the pleasure they get is worth the trade-off.

To me, it’s all about balance. There’s no boilerplate solution; it depends on your personal situation. With some planning, I believe that you and your wife can enjoy this time in your life without jeopardizing your future. Here are some things to consider.

Start With an Overview of What You Have to Spend

The first thing I’d do is look at the broad numbers. Add up how much you currently have to spend each year from all your predictable income sources — for example, Social Security benefits, pensions and real estate income.

It’s the rare retiree who can live on a reliable income stream alone, so next look to your portfolio. The standard industry recommendation is to withdraw up to 4 percent a year if you want your money to last for 30 years. In other words, if you’ve saved $1 million, you could withdraw about $40,000 a year (increasing each year with inflation) from your portfolio. (See more on how to invest below.) But that’s not set in stone.

Depending on your respective ages or the length of time you plan to continue working, you and your wife may feel your money only needs to last 20 years. You could then decide to take more from your savings earlier to pay for the things you want to do when you’re young. Or you may splurge on a special treat one year and cut back the next.  It’s your decision; just make it with full awareness of how it may impact your future.

Review Your Investments

While you’re looking at your portfolio, make sure you’re invested appropriately for this time in your life. As you move into your 60s and 70s, it’s generally wise to begin taking a more conservative approach. You’ll most likely want to have income-producing investments, but in order for your portfolio to last for decades, you will also need to own investments that have the opportunity for growth. For example, a moderately conservative portfolio would have 40 percent stocks, 50 percent fixed income and 10 percent cash.

Look at Your Expenses

Now it’s time to look at the spending side of your equation, starting with the essentials. First, make sure you can cover housing, insurance premiums, health care and basic living expenses, such as food and utilities. With those taken care of, you can feel more secure about spending extra money on the nice-to-haves. It’s also important to have at least a year’s worth of your savings in cash so you’re prepared for anything that may come your way.

Plan and Prioritize Together

This is probably the most important point. To spend comfortably, you and your wife need to be upfront about what’s most important to each of you and where you’re willing to make trade-offs. Create a budget for the things you each want to do, and then don’t be afraid to spend the money. With thought, planning and mutual agreement, you can enjoy the present, as well as the future — even if you live to a ripe old age.

Carrie Schwab-Pomerantz, CERTIFIED FINANCIAL PLANNER ™ is president of the Charles Schwab Foundation and author of “It Pays to Talk.” You can e-mail Carrie at