How long should your retirement savings last? First, find out how long you can live.
One of the things that makes saving for retirement so difficult is not knowing how long it will last. You’re trying to accumulate enough money to never run out of money while you’re alive — without knowing how long you’ll live.
But having a rough estimate can help you save smarter for your retirement years.
A new study by the TIAA Institute-GFLEX Personal Finance Institute shows that only 37% of US adults have a clear understanding of how long they can live. That is to say, the majority of the population is essentially planning for retirement aimlessly, not knowing how much to save or how long that savings should last.
“Understanding longevity is fundamental,” says TIAA. “The right decision-making depends on understanding how long retirement can last.”
In this study, the TIAA included for the first time a question to measure “life expectancy knowledge”—or understanding of the average life expectancy of men and women. Men and women were asked about life expectancy at age 60 for men and women, respectively. Both versions of the question offer four answer choices—correct answer, overrated answer, downvoted answer, and “don’t know” options.
The correct answer is 85 years old for women and 82 years old for men.
Read: Do you want to live to be 100 years old? Here’s what the latest longevity research says
A total of 37% of respondents answered correctly, while 28% answered “don’t know” and were considered to have “poor life expectancy knowledge”. In addition, 25% chose the answer that underestimated the life expectancy of 60-year-olds and 10% chose the answer that overestimated life expectancy.
“Considering people with poor knowledge of life expectancy and those who underestimate life expectancy together, more than half of American adults (53%) are working with inaccurate information,” the TIAA said. This could jeopardize their retirement preparations.”
The importance of understanding longevity means that people can better plan and save more wisely for retirement.
“Just like financially savvy retirees, longevity savvy retirees are more likely to plan and save for retirement while still working than those with a life expectancy,” says the TIAA. Life expectancy awareness is poor and they tend to achieve better financial results in retirement,” said TIAA.
As well as being financially savvy, longevity-savvy retirees are more likely to plan and save for retirement while still working and are now more likely to achieve financial results, the TIAA says. better in retirement.
Essentially, those who demonstrated poor longevity knowledge reported that their lifestyle in retirement fell short of pre-retirement expectations compared with those who demonstrated solid longevity knowledge. .
The TIAA found that the most striking finding of the study was that women tend to be more knowledgeable about life expectancy than men—with 43% of women demonstrating knowledge of longevity compared to 32% of men . This is in stark contrast to the level of financial literacy – women’s financial literacy is consistently inferior to that of men, the study said.
“Although often an overlooked factor, the importance of understanding longevity is not surprising because securing retirement income inherently involves planning for a long time,” the TIAA said. will be for retirement, this is uncertain.”
Do you have questions about retirement? Social Security, where do you live or how to afford? Write letter for [email protected] and we may use your question in a future story.