Understanding life expectancy for better retirement planning

[UNITED STATES] Many adults in the U.S. remain unaware of the average life expectancy, a gap that could hinder effective retirement planning. A study released Monday by the TIAA Institute and the Global Financial Literacy Excellence Center surveyed Americans on how long they believe retirees live, aiming to assess whether people are saving adequately for their post-work years. The findings revealed significant misunderstandings.

Approximately 25% of respondents admitted they didn’t know how long a typical 65-year-old is expected to live, while 35% underestimated the lifespan. The study notes that a 65-year-old man today can expect to live until about 84, while a woman of the same age typically lives to around 87.

Grasping life expectancy is a key factor in retirement planning because it directly affects how much money individuals need to set aside. Longer life spans translate to more years of expenses, including healthcare, housing, and everyday needs. Without accurate awareness of this, many could find themselves financially unprepared once they retire.

“For many, understanding the potential length of retirement is one of the biggest hurdles to achieving financial security,” said Kourtney Gibson, CEO of Retirement Solutions at TIAA, in a statement.

Though it may not seem like an urgent detail, knowing life expectancy plays a crucial role in saving strategies and future financial planning. A March survey by Nationwide Retirement Institute found that most Americans underestimate their likelihood of living to 100, resulting in inadequate savings for the prolonged costs of aging.

Underestimating life expectancy can have serious repercussions. Retirees who exhaust their savings may need to rely on public assistance or family support, placing stress on social systems and loved ones alike. Furthermore, running out of funds can lead to heightened financial anxiety and diminished quality of life during retirement.

Research from Nationwide Retirement Institute and The American College of Financial Services highlights that extending retirement by just five years—from 30 to 35 years—increases the risk of depleting savings by 41%, based on past market returns.

Longevity awareness remains a critical factor in retirement readiness. While no one can predict their exact lifespan, this study shows that poor understanding of typical retirement duration complicates financial planning.

Boosting financial literacy, including education about life expectancy, is essential. Programs and tools that provide accurate information can help individuals make better-informed choices about saving for retirement.

Those who underestimate their retirement length are also likely to undersave, the study warns. “This report highlights a significant issue—many Americans approach retirement planning without a clear grasp of how long they might live,” noted Annamaria Lusardi, economist at Stanford University and academic director of the Global Financial Literacy Excellence Center