Your greatest retirement risk may be something that’s unknowable: how long you will live.
Only 1 in 3 Americans can correctly identify how long a 65-year-old will typically live, according to new research from the TIAA Institute. That has real consequences, as workers who underestimate longevity tend to save less, plan less and risk running out of money in what could be a decades-long retirement, the research arm of financial-services company TIAA found.
“To many, it’s the great ‘how am I supposed to know?’ kind of question,” Surya Kolluri, head of the TIAA Institute, told MarketWatch. “But understanding longevity isn’t optional — it is foundational to retirement security.”
The importance of understanding longevity and your full financial needs in retirement comes as Americans are living longer but face a gap in terms of saving for retirement. The median amount American workers have saved for retirement is just $955, according to the National Institute on Retirement Security. Yet Americans believe they will need $1.46 million to retire comfortably, according to a study by Northwestern Mutual.
“Since Social Security was created, we’ve added 17 years to life expectancy,” Kolluri said. “That’s a lot more time to plan for and to manage.”
When Social Security was signed into law in the 1930s, life expectancy at birth was lower than the retirement age of 65 — roughly 60 years for men and 64 years for women. That life expectancy, however, was heavily skewed by high infant mortality, according to the Social Security Administration; those who made it to adulthood had a greater chance of living longer. Men who made it to age 65 had an average of almost 13 more years to live, with almost 15 years for women, Social Security Administration data showed.
Today, overall life expectancy in the U.S. is an average age of 79, according to the Centers for Disease Control and Prevention. But for those who reach age 65, the average life expectancy is now 84 for men and 87 for women, according to TIAA, based on the 2024 Social Security Administration’s Trustees Report. There’s a 30% likelihood that a 65-year-old man will live at least until age 90, while there’s a 40% likelihood women will do the same, the research found Men tend to underestimate life expectancy, while women’s estimates tend to be more accurate, TIAA found.
While family history may play a role in longevity, personal habits and advancements in medical technology also have added to people’s lifespans, Kolluri said.
“We are not our grandparents. We likely have a different zipcode, a different education, different healthcare opportunities,” he said.
With the gift of longevity comes the burden of paying for it. A survey from life-insurance giant Allianz found that 67% of Americans are more afraid of running out of money in their old age than they are of actually dying.
Americans increasingly have to fund their own retirement as pensions have fallen away. And relying on Social Security has become somewhat riskier as the trust funds that back Social Security are expected to hit insolvency by 2032, triggering an automatic cut for beneficiaries unless Congress acts to shore up the program.
Having shorter retirement expectations translates into less saving, according to TIAA. Workers expecting fewer than 10 years in retirement are far less likely to save regularly (48%) than those expecting 30 or more years in retirement (71%), TIAA found.
Workers anticipating longer retirements are nearly twice as likely to have calculated their savings needs (51% versus 27%). Yet even among those planning for 30 or more years in retirement, fewer than 30% have sought professional advice in the past two years, TIAA found.
Workers who underestimate how long 65-year-olds typically live are also more pessimistic about their own longevity — with only 25% expecting to reach age 90, versus 72% of those who overestimate. Those shorter expectations translate directly into less saving and planning, according to TIAA.
Generation X and millennials underestimate life expectancy more frequently than baby boomers. Gen X are those born between 1965 and 1980, while millennials are those born between 1981 and 1996; baby boomers are those born between 1946 and 1964. Those younger generations, however, have some time to correct their course if they’re off track.
“It’s almost never too late to prepare for retirement. There’s almost always a chance to make a correction to income or expenses,” Kolluri said.
By: Jessica Hall