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Longevity in Retirement & What You Should Know

Michelle Malacinski |
Categories
Investments
Retirement
Finance
Savings

How many years will your retirement last?

What are the chances you’ll live past 90?

Most of us answer those questions wrong because we don’t have strong longevity literacy.1

That means that about 81% of us1 aren’t working with a viable understanding of our own life expectancy.

Let’s explore how understanding longevity could create a positive impact in your retirement planning.

What is longevity literacy?

Longevity literacy refers to your knowledge about expected lifespans and how it relates to retirement. Most people have poor to moderate longevity literacy, which can create a two-fold issue:

  1. Miscalculated retirement savings: Without a clear understanding of just how long you could live in retirement, you may not save enough, leaving you without resources for decades longer than anticipated.
     
  2. An incomplete retirement plan: Your savings shouldn't be the only focal point for retirement planning. When considering more years in retirement, plans should incorporate strategies for maintaining quality of life and making adjustments in the future.

Interestingly, longevity literacy is more prominent among some demographics.

Longevity literacy by gender & generation.

The latest research paints an eye-opening picture of longevity literacy in the U.S.2

  • Men were 63% more likely than women to underestimate life expectancy. Remarkably, this is not how financial literacy trends among genders, where men outpace women.2
     
  • Boomers and the Silent Generation tend to have the strongest longevity knowledge, with roughly 45% of individuals (within each of these generations) demonstrating strong longevity literacy versus only 30% of Gen Z and Gen Y. Given that older generations are closer to their retirement age (or they’ve retired already), it makes sense that they’d have a better understanding of longevity when compared to younger generations.2
     
  • Gen Z and Gen Y are more likely to say they “don’t know” about longevity literacy. They’re also more likely to underestimate life spans.2
     
  • Poor longevity literacy is linked to reduced retirement readiness. This lack of knowledge can mean that people don’t just misunderstand how long retirement could last, but they’re also lacking a strong grasp on how to draw income in retirement.2

Why longevity literacy matters in retirement & finance.

A deeper understanding of your personal lifespan and how it relates to your finances can be vital to comprehensive retirement planning. Setting a more realistic timeline for your retirement can result in prudent planning and more reliable financial readiness, should your post-work life last 20 years or more.

Longevity literacy can also help you answer other crucial questions related to life in retirement, including (but not limited to):

  • How long can I live on my retirement savings?
     
  • What is my guaranteed income source?
     
  • What will it take to maintain my quality of life for decades (and accounting for inflation in the future)?
     
  • When should I start drawing Social Security benefits or pensions?
     
  • What kind of healthcare, long-term care, and other expenses do I need to prepare for?
     
  • Will I need to work for income in retirement? What could this look like?
     
  • What strategies should I put in place now to set myself up for a happy, long-lasting retirement later?

With stronger longevity literacy, any of us can improve our retirement plans. We may also enjoy life in retirement more than we ever could’ve imagined.

How to improve your longevity literacy & retirement planning

Longevity literacy can be key to a long, rewarding retirement. Giving you perspective on just how long retirement could last, longevity literacy can foster more effective planning while offering greater peace of mind.

And remember, when you’re ready to expand your longevity literacy and retirement plans, a financial professional can help.

Sources:

  1. https://www.tiaa.org/content/dam/tiaa/institute/pdf/infographic/2023-08/2023-tiaa-institute-gflec-pfin-longevity-infographic.pdf
  2. https://www.tiaa.org/content/dam/tiaa/institute/pdf/insights-report/2023-01/longevity_literacy_financial_literacy_and_retirement_readiness.pdf

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