People are living longer. But what most Americans don’t fully consider is how much longer they should expect to live — and that lack of comprehension or acknowledgment has enormous ramifications on retirement planning.
Longevity literacy, or a general understanding of the implications of an increased life span, is essential when planning for retirement. If you aren’t aware of how long you will most likely live, you can’t adequately prepare for your financial needs down the road. Economists are just beginning to take stock of our country’s longevity literacy deficits, and the numbers are concerning.
Understanding the Statistics
According to the most recent data from the Centers for Disease Control, men are expected to live an average of 74.8 years, while women can expect to live 80.2 years.
Those figures probably look familiar. If you were to survey a group of American adults on the subject — which is exactly what the Teachers Insurance and Annuity Association of America Institute (TIAA) did, in their 2022 study on financial literacy, longevity literacy, and retirement readiness — most would say they expect to live for approximately those averages.
Life expectancy statistics, however, don’t necessarily reflect how long individuals actually live. The data that is typically reported has been calculated for people at the time of their birth, which needs to take into account statistics on unintentional injury, homicide, suicide and other factors that would lower the overall average life expectancy. If you were to reassess a person’s life expectancy at 65, however, the predicted age to live would likely be higher. One report from 2023 estimates that the gap between expected life spans at birth and realized life spans at death might be at least eight years.
How Longevity Literacy Impacts Retirement Planning
The TIAA study’s most worrying findings revealed that the number of people who understand how long they will likely live is disturbingly small. The study asked, “On average in the U.S., how long will a 65-year-old man/woman live?” Only 35% of the respondents answered correctly: A 65-year-old man has a life expectancy of 84, and a woman, 87.
This guessing game has serious ramifications for retirement planning. Of the respondents, 31% underestimated how long a 65-year-old person would live, and 25% responded that they didn’t know. That means over half of the population could be inadequately financially prepared for their actual lifespan.
Benefits of Improving Your Longevity Literacy
Longevity literacy is more than just realizing that you are probably going to live longer than you thought. It is about understanding that those extra years will entail costs that you can anticipate and (for the most part) plan for, and it requires critical analysis of your current health, finances and lifestyle.
A first step you can take is to assess your assets as they are right now. Having an understanding of how much you currently hold in retirement savings will give you an idea of what you’re working with, and what you can expect. Meeting with a financial planner could be helpful, or you can evaluate your retirement financial plans using some of our recommendations.
Fortunately, improving your longevity literacy is relatively simple, and can help lay the groundwork for life going forward. Subsequent TIAA reports showed that workers with strong longevity literacy tended to be more confident about having enough money to live comfortably through retirement, and retirees with strong longevity literacy are more likely to report that their current lifestyle meets or exceeds their preretirement expectations.
Perusing the original report is a good start to understanding all the factors involved, and the TIAA has also produced a number of follow-up reports and infographics. The World Economic Forum collaborated with Mercer Financial to create a downloadable PDF that shares insights and concrete actions people can take to address different dimensions of longevity literacy, as well.
Finally, if podcasts are more your speed, “Friends Talk Money” has an excellent episode dealing with longevity literacy.
Top image: Tinpixels from Getty Images Signature, via Canva.com
