You Think You’ll Live Till 75? Think Again and Find Out Why!

The average lifespan of Americans is commonly understood to be between 70 and 80 years, with men averaging 73.5 years and women 79.3 years. Yet, what most don’t realize is that life expectancy increases with age. For instance, a 70-year-old man today is expected to live until 85, while a 70-year-old woman will likely reach 87. This concept is termed ‘longevity literacy,’ and lacking this knowledge can be extremely costly.

Consider this: if a man retires at 65 with savings of $250,000 and draws $30,000 annually, his savings will deplete by the time he’s 73.5. However, longevity statistics suggest he might live up to 84, indicating a gap in his retirement planning. Unfortunately, many older Americans, especially men, aren’t aware of how long they’ll live post-retirement, which is crucial for effective financial planning. It’s a concerning lack of awareness because if one plans for retirement up to 75 but lives until 85, they may run out of funds.

A senior economist at the TIAA Institute, Paul Yakoboski, highlights the importance of considering potential lifespan when planning for retirement to manage finances effectively. Alarmingly, in a TIAA Institute survey, only one-third of men correctly estimated that a 65-year-old man would live another 19 years on average. Many underestimated or admitted they didn’t know, even with multiple-choice options.

Interestingly, women showcased better longevity understanding. In the survey, 36% accurately gauged that a 65-year-old woman would typically live for another 22 years. Yakoboski attributes this to women’s tendency to focus more on family health and well-being.

A revelation from Dr. Luigi Ferrucci, an expert on human longevity, is that while the average lifespan is commonly reported at birth, it increases with age. The idea is simple: the older you get, the longer you’ll likely live.

TIAA stresses the importance of longevity literacy, warning of the repercussions for those who don’t account for their full retirement span. It’s evident when looking at the figures there’s a considerable probability that someone aged 67 will still be alive at 90 or even 100.

The primary takeaway from the researchers is dual-faceted: accurately estimate your lifespan and ensure your retirement plan covers those years. Individuals with strong longevity literacy are more likely to have robust retirement plans and vice-versa. 

For effective retirement planning:

  • Use a retirement calculator or consult a professional to determine needs based on life expectancy.
  • If you haven’t started saving, begin now and consistently increase the amount saved.
  • Focus on building net worth, reducing debts, and optimizing expenses.

Sticha Yakoboski and Annamaria Lusardi expressed concern in a TIAA report that many adults underestimate their lifespan. They suggest it’s better to overestimate lifespan; for instance, if you believe you’ll live till 85, plan for 90.

Recent surveys indicate that Americans believe they need around $1.8 million for retirement. While nearly half have tried to calculate their retirement needs, only 64% are confident they’ve saved enough. Amid concerns about inflation and decreasing retirement savings, the importance of budgeting for retirement has grown. This is especially true as more Americans independently manage their retirement budgets, transitioning from traditional pensions to 401(k) and other defined-contribution plans. Understanding one’s longevity is crucial in this financial equation.