How Long Does Retirement Take? Most of us don’t know
Try your hand at this one-question quiz: How long can a 65-year-old American woman live?
A) About 17 years more, to 82 years
B) About 22 more years, to 87 years
C) About 27 more years, to 92 years
Only about one-third of us know the correct answer, which is B, according to a new report from the TIAA Institute, the research arm of the nonprofit financial services organization.
Longevity knowledge is short among American adults, the survey found, and that knowledge gap has serious implications for our retirement.
The average American will live an average of 78.4 years, according to the federal life expectancy data.
But life expectancy increases with age. A man turning 65 today can expect to live another 19.3 years, reaching age 84, according to Social Security’s life expectancy calculator. A 65-year-old woman will live 21.9 years longer, on average.
The longevity numbers reported by the CDC, the ones we learn in school, are calculated at birth. But life expectancy goes up from there. Simply put: The longer you live, the longer you will live.
Most Americans don’t know how long retirement lasts
Not many of us understand that basic concept of longevity. As adults, most of us have no idea how long we can live. And we tend to guess low.
In the TIAA survey, which reached 3,371 adults in January, only 33% chose the correct answers to multiple choice questions about the age of a man and a woman at 65 years old. Of the others, 32% chose the lowest number, while 13% chose the highest, and 22% said they did not know.
There is an obvious connection between how long you will live and how long your retirement will last. People who underestimate their life expectancy tend to plan for a shorter retirement. And that can be a costly mistake.
In the TIAA study, people who underestimated life expectancy also predicted a shorter retirement. More than half of that group said they expect to live less than 20 years after retirement.
That rate is also probably very low.
The average American worker retires at age 62, according to survey data from the Transamerica Center for Retirement Studies.
A man who retires at age 62 can expect to live about 21 more years, according to longevity data. A woman may live longer than that.
What is the right length of a retirement plan?
Retirement planners often advise their clients to plan for a longer than average retirement. Why? Because your retirement plan needs to cover all situations, including one where you or your spouse live up to age 95.
“Life expectancy is an important part of retirement planning that has eluded society for too long,” said Catherine Collinson, CEO of the Transamerica Center.
“The real danger is running out of savings,” Collinson said.
Americans fear withdrawing their savings as much as any other potential retirement asset, including frailty, according to research by the Transamerica Center.
Another 2025 study, from Allianz Life, said Americans fear bankruptcy more than death itself.
Indeed, about 40 percent of American families are “at risk of not being able to maintain their standard of living in retirement,” in terms of finances and life expectancy, said Anqi Chen, associate director of savings and household finances at the Center for Retirement Research.
Most financial planners retire in their 30s. If you retire at age 62, that plan will cover costs until you’re 92.
Americans who wait 30 years or more to retire are more likely to save for retirement, and are able to save at higher rates, the TIAA report found.
“The longer people live, the more they think about their savings, the more grateful they are and the better they feel about the results,” said Surya Kolluri, head of the TIAA Institute.
Millennials and Generation X don’t have the knowledge to live longer
The TIAA survey found that middle-aged Americans, millennials and Generation X, have a poor understanding of longevity: 36% of millennials and 37% of Gen-Xers underestimate how long a 65-year-old man or woman may live, compared to 26% of baby boomers and 21% of Silent Generation Americans.
Men are more likely to underestimate women’s life expectancy, research has found.
Kolluri suspects that Americans nearing retirement, or those who have retired, have “sharp” views on longevity. Regarding gender differences, he mentions the traditional role of women as caregivers.
“Being close to the subject gives a person a better understanding of life time,” he said.
When Americans underestimate life expectancy, Kolluri said, they often fall back on independent factors: Their health problems, or the age at which their parents or grandparents died. But life expectancy tends to increase with successive generations, thanks to advances in medical care and healthy lifestyles.
“You are not your grandparents,” he said.
This article first appeared in USA TODAY: How long does retirement last? Most of us don’t know
Reporting by Daniel de Visé, USA TODAY / USA TODAY
USA TODAY Network via Reuters Connect
