Here Is Why Longevity Literacy Is Important To Your Retirement

If you’re worried about whether your retirement assets will endure, consider that life expectancy may be a more significant factor than even historically high inflation.

Many people in the United States are concerned that they haven’t saved enough for retirement because of the recent persistently high inflation rate. They are worried that the rising food, electricity, transportation, and healthcare expenses would adversely impact their retirement funds.

And yet, there’s something else you should think about: how long you may expect to live.

TIAA Institute and George Washington University researchers found in a new report that most people, more than half of U.S. adults, do not know how long they will generally live in retirement, which, given their potential longevity, could lead them to fail to save enough money to last as long as they do in old age.

Retiring successfully requires “longevity literacy.”

Even though previous research has indicated that women’s financial literacy routinely trails that of men, the survey revealed that women’s “longevity literacy” is stronger than men’s, with 43% of women displaying excellent longevity knowledge, compared to 32% of men.

This is a “shocking conclusion,” according to economist and head of GWU’s Global Financial Literacy Excellence Center Annamaria Lusardi. Women may recognize that they live longer than males but may lack information about handling this knowledge. Therefore, she said, women need more knowledge about retirement planning than men do.

Men and women in the United States often retire around their mid-60s. The Social Security Administration estimates that men and women, respectively, may expect to live an additional 22 and 25 years after turning 60, although many people may be unaware of this fact.

According to Surya Kolluri, chairman of the TIAA Institute, a three-pronged approach is necessary to ensure that your retirement savings last for the duration of your desired lifestyle. He said investing on top of Social Security and a guaranteed lifetime income product may be a viable approach to protect against inflation and volatile financial markets.

Increases to 401(k) and IRA contribution limitations due to inflation

There has been an increase in the maximum contribution to a retirement account due to inflation changes for 2024. You may contribute up to $22,500 to a regular or Roth 401(k) this year and an additional $7,500 (called a “catch-up” contribution) if you are 50 or older.

Additional contributions to your regular or Roth IRA are allowed up to $6,500. If you are 50 or older, you can make a $1,000 catch-up contribution to your retirement account, increasing your savings to $7,500.

Please note the following important ages while considering retirement options. There are important financial benchmarks to keep in mind as you approach or are already in retirement. Because you may live into your mid-80s, here are some extra milestones to remember:

  • After reaching age 50, you are eligible for higher contributions to your retirement funds.
  • Withdrawals from retirement accounts such as IRAs and 401(k)s can be made starting at age 59 and a half. There is a 10% tax penalty for early withdrawal.
  • Social Security payments can be claimed between the ages of 62 and 70, albeit they are reduced by 30% if you begin receiving them before full retirement age (which varies depending on your birth year). If you delay collecting your benefits until you’re 70 years old, you’ll get an annual rise of 8%.
  • After you turn 65, you are eligible for Medicare and should enroll or face a penalty.

It’s also become a significant milestone to reach 73 years of age. Requirement minimum distributions (RMDs) from retirement accounts like IRAs and 401(k)s must be started on April 1 following your 73rd birthday. This rule went into effect on January 1, 2018. In 2033, the required minimum distribution age will rise to 75.