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To Plan Your Retirement Properly, You Need to Answer This Key Question

Key Retirement Question: How Long Will You Live?

The biggest question when it comes to retirement is also one that can be difficult to answer: how long will you live? This question, and the assumptions that people make when answering it, influences many financial aspects of their lives. From how they invest to what they decide about insurance, how they provide for heirs and how much they save, to where they live and what type of lifestyle they will have in retirement, among innumerable tax decisions and other financial milestones. All of these answers are driven and changed by the biggest fear that hangs over many retirees: will they outlive their money?

A financial advisor can help you create a financial plan for your retirement needs and goals.

Less Than 40% of Americans Understand Their Longevity

Unless your doctor just gave you six months to live, this concept – called “longevity risk” – can’t be definitively answered. But just the simple fact of grappling with it can help people become better prepared for retirement and happier with their lives after they leave work.

That’s one take-away from the 2022 TIAA Institute-GFLEC Personal Finance Index survey, which found just 37% of adults have a good understanding of their longevity in retirement.

The survey also found that those who overestimate or correctly estimated their life expectancy had more confidence and satisfaction in their retirement than retirees who responded “I don’t know” or who underestimated their life expectancy.

As an example, 37% of retirees who said they did not know the projected longevity for their gender said their lifestyle in retirement fell short of their expectations.

The survey asked people to identify their own gender’s life expectancy at age 60. The choice of answers for men was:

  • 16 more years (living to age 76)
  • 22 more years (82)
  • 28 more years (88).
  • Don’t know

Women participants chose answers from:

  • 19 more years (living to age 79)
  • 25 more years (85)
  • 31 more years (91)
  • Don’t know

The correct answer in each case was No. 2. The results for men were:

  • Correct: 32%
  • Didn’t know: 27%
  • Overestimated: 11%
  • underestimated: 31%

And, the results for women were:

  • Correct: 43%
  • Didn’t know: 28%
  • Overestimated: 10%
  • Underestimated: 19%

The gap that showed many more women answering correctly than men was the most interesting finding for Surya Kolluri, the head of the TIAA Institute. She noted that women often are less financially literate than men but in this case, were more literate when it came to longevity.

About 80% of respondents who answered correctly or who overestimated their potential lifespan reported feeling more confident about their retirement, and both sets of respondents prepared for retirement by saving regularly and had projected how much money they would need during retirement.

Of those who underestimated their longevity, 68% saved regularly for retirement, while 57% of respondents who answered that they didn’t know saved for retirement. In addition, 37% of those retirees who said they did not know their expected longevity said their retirement lifestyle was disappointing, compared with 30% of the respondents who underestimated it.

Bottom Line

Key Retirement Question: How Long Will You Live?

Understanding your longevity will help you determine how much to save for retirement. Those who underestimate the length of their lifespan can put themselves at a higher risk to run out of money in their golden years.

Tips for Retirement Planning

  • If you have questions about longevity and how much you will need to save for retirement, a financial advisor can help you create a financial plan for your needs and goals. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If you’re worried about outliving your retirement savings, you may consider investing in a qualified longevity annuity contract (QLAC). You can use this type of annuity to create an additional stream of income to stretch out your finances in your golden years.

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