Most of us seem to know that the average American lives 70 to 80 years. For men, he is 73.5 years old, and for women, he is 79.3 years old. To be precise.
Few people understand that life expectancy increases with age. An American man who turns 70 today will, on average, live to be 85. A 70-year-old woman will live to be 87 years old.
That knowledge is called longevity literacy. Many of us don’t have it, and ignorance may harm us.
Suppose a man retires at age 65 with $250,000 in savings. If he spends it at the rate of $30,000 per year, that money may allow him to live until his age of 73.5. However, according to the life expectancy chart, he can expect to live another 10 years, to the age of 84.
The majority of older Americans, especially men, do not know how long their retirement will last, or in other words, how long they will live.
When it comes to retirement planning, longevity literacy is key. If you budget for retirement assuming you’ll live to age 75, and you live to age 85, you’ll probably run out of money.
“What you have to think about when you retire is, ‘When will I die?'” said senior economist Paul Yacoboski. in TIAA Institute, the research division of the financial services nonprofit organization. “It filters how I manage my money and how I withdraw it.”
The TIAA Institute publishes widely read research on retirement finance. When the institute asked Americans, recent researchWhen asked how long a 65-year-old man can live, only a third of men correctly answered “19 more years.”
The TIAA study found that men were overrepresented at 35%, underestimating the longevity of men at retirement age. A further 23% answered “I don’t know.” That answer in particular puzzled researchers. The questions were multiple choice.
Women seem to have a somewhat better understanding of longevity. In this survey, a 65-year-old woman answered correctly that she expected to live another 22 years until she was 87 years old, 36% of the time. Only 26% of her guesses were low.
“Women understand that very well,” Jacobowski said. “The reality in most families is that women are the ones who focus on family medical care, everyone’s health, and caregiving issues.”
Their findings are based on a nationally representative survey of 3,503 adults.
How long does retirement last? Longer than many people think
Luigi Ferrucci According to the CDC’s official data on human lifespan, men live to be about 74 years old, so Ferrucci has five more years to live.
But Ferrucci works at the National Institute on Aging and knows a lot about longevity. According to one study, once an American man reaches the age of 69, he can expect to live to the age of 85. simple lifespan calculator From the Social Security Administration.
Ferrucci expects to live longer than that.
“My mother was 97 years old and my father was 98 years old, both in Italy,” said Ferrucci, the federal agency’s scientific director. He credits his good genes and Mediterranean diet.
The human lifespan reported by the Centers for Disease Control and Prevention is “calculated at birth,” Ferrucci said. These are the numbers most Americans learn in school and are reported in the newspapers every year.
However, lifespan increases from there. Simply put, the longer you live, the longer you live.
“Mortality rates tend to be very high in the first year of life, then decrease, and then gradually increase,” Ferrucci said.
TIAA makes longevity literacy into an organized movement and releases report something that warns of dire consequences For older Americans who are not planning for retirement.
“If you look at the numbers, there’s a good chance a 67-year-old will still be alive at 90,” Jacoboski said in a video call interview. “Some of them live to be 100 years old.”
His colleague Andrea Stica agreed: “The decision you have to make is whether you outlive your money or leave something behind.” Sutika is associate academic director of the Center for Global Financial Literacy Excellence at Stanford University.
Plan for longevity with retirement savings
According to the researchers, there are two takeaways here. Figure out how much time you have left to live and create a retirement plan that covers that number of years.
TIAA researchers found that people with high longevity literacy (about 12% of the population) were more likely than other adults to plan for retirement. Conversely, people who have a solid retirement plan tend to understand how long they can expect to live. The two characteristics are closely related.
“People with high longevity literacy are better at planning for work and saving for retirement,” Stika says. “There is a very strong link between longevity literacy and retirement outcomes.”
Here are some quick tips for planning for retirement.
- make a plan.Please consult retirement allowance calculator. Talk to a retirement planner or do the math yourself.Experts say it will be necessary 70% to 90% The part of your labor income that helps you maintain your standard of living. Calculate how long you are likely to live. Assess health risks.
- If you haven’t done so already, start saving. Try to increase your savings each year. Resist the temptation to spend money. If you have a 401(k) plan, make the most of it.
- Build your net worth: Pay off your debts. Reduce unnecessary expenses. Consider working longer hours, especially if your job is fulfilling. Consider passing on Social Security later. larger monthly check.
Sutisha and Jacoboski collaborated with researcher Annamaria Lusardi on TIAA’s August report on longevity literacy.
Scientists are concerned that many adults underestimate how long they will live. Rather, people should err in the opposite direction. If you are currently 65 years old and he is expected to reach 85, plan until age 90.
How much money do you need to retire?Surveys show that most Americans count $1.8 million.
According to a survey by the Employee Benefit Research Institute, about half of Americans have at least estimated how much money they’ll need to live comfortably in retirement. 2023 Retirement Confidence Survey.
And how much should you save for retirement? According to investment firm T. Rowe Price’s analysis, savings goals are: 7 to 13 times your annual income by age 65.
According to the EBRI survey, only 64% of workers believe they will have enough money to last until retirement. This number has declined sharply over the past year. Americans are worried about persistent inflation and a decline in retirement savings that will take a hit in 2022. Statistics show that the average 401(k) account lost about one-fifth of its value last year. Fidelity Investments data.
Here’s why budgeting for retirement is more important than ever
Craig Copeland, director of Wealth Benefits Research at EBRI, said that budgeting for retirement is more important than ever as more Americans create their own budgets. Ta.
For the past few decades, many American retirees relied primarily on Social Security and defined benefit pensions, sources of funding that guaranteed steady payouts until death.
Over time, traditional pensions have been replaced by 401(k)s and other defined contribution plans. After retirement, workers set a schedule for withdrawing money.
“Longevity is a key part of that equation,” Copeland said.
