Planning for retirement involves making an educated estimate about your life expectancy, but numerous Americans lack proficiency in understanding longevity.
According to a report released by the TIAA Institute last year, just 35% of American adults were able to accurately respond to a query about the anticipated lifespan of a 65-year-old male and female. The institute states that the expected age at death is 84 years for males and 87 years for females, according to data from the Social Security Administration which accounts for enhancements in long-term survival rates among various demographic segments.
Miscalculating the likelihood of a lengthy lifespan may result in saving insufficient funds and filing for Social Security benefits prematurely. Conversely, overestimating how long you might live could cause you to be overly cautious with your expenditures.
Financial planning software necessitates inputting an estimated lifespan. As Chris Briscoe, the director of financial planning at Girard Advisory Services in King of Prussia, Pa., points out, “People often ask us to assume they’ll only live up to 80.”
It’s easy to see why some might be confused. The U.S. has experienced a decrease in life expectancy over the past few years, dropping to an average of 74.8 years for men and 80.2 years for women as of 2022. This figure represents the anticipated average lifespan from birth; hence, many individuals will surpass these figures. Factors such as “deaths of despair”—including suicides, fatal overdoses due to drugs and alcohol, and long-term alcohol abuse—have played significant roles. More recently, the impact of the COVID-19 pandemic has further exacerbated this trend.
Even though it may be daunting, this trendline represents life expectancy from birth. This means it accounts for those who pass away during early and mid-life stages. Individuals reaching 65 years old can expect to have a longer lifespan. Moreover, couples generally fare even better; there’s a 25% probability that one partner in an average-health 65-year-old heterosexual couple will reach 96 years of age. Additionally, wealthier individuals typically enjoy greater longevity since studies repeatedly indicate that richer people often surpass the lifespans of less economically advantaged ones.
Despite what headlines might suggest, numerous individuals anticipate passing away at an age similar to that of their parents. Nevertheless, research from 2018 examining extensive genealogical information revealed that genetic factors account for less than 7 percent of someone’s lifespan—a significant drop from earlier estimations which ranged between approximately 20 and 30 percent. Furthermore, various illnesses that used to be lethal decades ago—like certain forms of cancer—are now much more treatable.
In summary? It’s beneficial to approach retirement with a realistic assessment of how long you might live. Longevity calculators can provide an estimation based on your health condition and various other elements.
Despite this, the typical lifespan after turning 65 often extends beyond the point where Social Security benefits supposedly balance out. This refers to the age when your total payout remains constant regardless of whether you opt for earlier, diminished checks or wait for later, increased ones. Opting for early withdrawals reduces these payments permanently by approximately 30%, as opposed to claiming them at the standard retirement age of 67, applicable to those born in 1960 and afterward. Conversely, delaying until reaching the peak benefit age of 70 escalates the payment amount to 124% of what it would have been had you claimed at the regular retirement age.
Carolyn McClanahan, both a financial advisor and a physician, conducts personalized evaluations of her clients’ potential lifespans. For those clients who aren’t particularly mindful about their health—such as individuals in their 50s with issues like hypertension, diabetes, and obesity due to excess weight—she typically employs standard life expectancies.
For customers who prioritize self-care, McClanahan assumes a lifespan of 100 years. Nevertheless, she strives to make sure that even her most health-conscious clients do not compromise their current quality of life for potential long-term benefits. “I believe it’s inappropriate for individuals to concentrate solely on uncertain futures at the expense of enjoying the present.”
Send an email to Elizabeth O’Brien at [email protected]
