The biggest risk retirees face is outliving their assets –spending too much or saving too little for their golden years,which are potentially a lot longer than many might expect.

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According to a new report from Wells Fargo Investment Institute,citing government data, the average life expectancy for a65-year-old man today is 84.3 years and for a 65-year-old woman86.6 years, and those numbers are expected to grow. By 2030, nearlyone in five U.S. residents is expected to be 65 or older, accordingto the report Living Longer, Living Better.

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Given this “longevity risk,” coupled with the declining ratio ofworkers to retirees to fund Social Security and Medicare anddeclining market growth rates, “it's imperative to develop anappropriate and realistic plan” for a “potentially longerlifespan,” according to the report. Here are some of its keyrecommendations for advisors and their clients to develop instead a“longevity dividend”:

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retirement planning how not to go broke1. Beprepared to fund two to three decades of retirement ormore.

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“Whatever your current age or financial situation, we believeit's imperative to develop an appropriate and realistic plan foryour potentially longer lifespan,” the report states. “You have tofund 20, 30, 40 years of retirement if you retire at thetraditional 62 to 65,” Tracie McMillion, head of Global AssetAllocation Strategy for the Wells Fargo Investment Institute,said.

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According to government statistics, the average life expectancyis now four years longer than it was in 1990 – increasing onaverage one year for every four. If that pattern continues, 26years from now the average life expectancy for men will be over 88years and for women over 90. Food for thought for those now intheir early 40s.

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retirement planning how not to go broke2.Consider the impact of rising health care costs.

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While longevity is increasing, health care costs are rising.That, coupled with “diminishing defined-benefit pension plans andthe uncertain future of Social Security all pose challenges andrisks for retirees,” the report stated.

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Health care spending in the U.S. for those 65 to 84 is close to$16,000 per person – almost double the spending for those 45 to 64years of age, according to the report, which cited 2014 data fromthe HealthAffairs policy journal. For those 85 years or older, itdoubles again to almost $35,000.

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retirement planning how not to go broke3.Don't count on Social Security as it is now. Payments coulddecline.

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For most people, income from Social Security will be“insufficient, so they have to fill that gap,” McMillion saidadding that Social Security payments could potentially decline as aresult of funding issues.

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By 2030 — just 14 years from now — nearly one in five U.S.residents is expected to be 65 or older, according to the WellsFargo report. At the same time, the ratio of workers to retireesfunding Social Security is expected to be roughly 2 to 1, down fromnearly 3 to 1, according to the Social Security Administration.

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“This population mismatch is likely to result in policies thatplace a greater burden on current workers and reduce benefits forretired workers,” according to the Wells Fargo report. “Governmentprograms designed to assist retirees have grown disproportionatelylarge and threaten to crowd out most other expenses by 2040 ifreform is not enacted.”

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retierment planning how not to go broke4. Worklonger, spend less or plan better if you retireearlier.

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If “working longer is not your definition of living better”[and] “If you plan to exit the work force at an earlier age, you'llneed to plan for that,” according to the report.

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To that end, Wells Fargo suggested that younger workers startsaving for retirement as soon as they start working and olderworkers increase their exposure to equities while trimming bondholdings. In addition, Wells Fargo recommended that workers age 50or older take advantage of catch-up contribution to IRAs and 401(k)plans.

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They can contribute up to $6,500 each to a traditional or RothIRA, if they qualify, which is $1,000 more than those under 50. For401(k) plans the maximum contribution is $24,000, or $8,000 morethan the maximum for those under 50 years old.

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retirement planning how not to go broke5. Keepstocks in your portfolio after retirement.

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“It's critical that your assets grow faster than the price ofgoods and services during your retirement years,” which favorsstocks, according to the report. “In the years followingretirement, the potential returns from stocks over time are morelikely to outpace inflation when compared to the long-term returnsfrom cash alternatives or short maturity bonds.”

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The report included a chart showing that $2,220 in 2015 has thesame purchasing power as $1,000 in 1985, 30 years earlier.

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'Your future standard of living will depend on your ability tocover living expenses throughout retirement,” according to thereport.

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For those retirees unwilling to take the additional market riskof stocks, the report suggested that they consider annuitiesinstead only if they “fully understand terms and conditions.”

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retirement planning how not to go broke6.Maintain a diversified portfolio in retirement even if you'rewealthy.

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“Asset placement, particularly for taxable assets may beimportant consideration … as withdrawals from retirement accountsmay be taxed at different rates,” the report stated.

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The report recommended that wealthy retirees hold bonds inretirement accounts and growth assets, like stocks, innonretirement accounts because their capital gains and dividendswill be taxed at a lower rate than income.

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Bernice Napach

Bernice Napach is a senior writer at ThinkAdvisor covering financial markets and asset managers, robo-advisors, college planning and retirement issues. She has worked at Yahoo Finance, Bloomberg TV, CNBC, Reuters, Investor's Business Daily and The Bond Buyer and has written articles for The New York Times, TheStreet.com, The Star-Ledger, The Record, Variety and Worth magazine. Bernice has a Bachelor of Science in Social Welfare from SUNY at Stony Brook.