Lack of Awareness Regarding Average Life Span Impedes Efficient Retirement Preparation
Americans Underestimate Average Life Expectancy, Affecting Retirement Planning
A new study by the TIAA Institute and the Global Financial Literacy Excellence Center has revealed that many Americans are unaware of the average life expectancy in the United States, potentially hampering their retirement planning efforts.
The study emphasized the importance of longevity literacy - understanding how long individuals tend to live past retirement age - in effective long-term financial planning. Misjudging the length of retirement can lead to insufficient savings, experts warned.
Approximately 25% of U.S. adults surveyed said they were unsure about the average lifespan of a 65-year-old retiree, while 35% underestimated it. A 65-year-old man, according to the study, can expect to live to 84, while a woman can expect to reach 87.
Kourtney Gibson, TIAA's CEO of Retirement Solutions, stated, "For many people, comprehending their potential lifespan during retirement is one of the most significant obstacles to achieving retirement security."
While the exact length of life is unpredictable, knowledge of life expectancy can aid in savings and future planning. A Nationwide Retirement Institute survey from March showed that most Americans underestimate their chances of living past 100 and are not saving enough for the financial demands of an extended lifespan.
Research from Nationwide Retirement Institute and The American College of Financial Services revealed that extending a retirement by five years from 30 to 35 years increases the risk of depleting savings by 41%, based on historical market returns.
The study, which surveyed over 3,800 Americans with varying socioeconomic, racial, and age profiles, highlighted the significance of longevity awareness. Poor longevity literacy can make future planning challenging, with those underestimating their retirement years likely to save inadequately for retirement expenses.
Understanding potential lifespan - while not a definitive figure - is crucial for financial planning. A longer life expectancy implies Americans may spend more years in retirement, leading to increased savings requirements, higher healthcare costs, inflation risk, and adjustments to Social Security and pension plans.
When planning for retirement, factors such as personal health, access to healthcare, and local public health policies should also be considered due to regional variations in life expectancy across the U.S. For instance, states like Hawaii and Massachusetts consistently rank higher than others in life expectancy, while certain Southern states have plateaued life expectancy gains for certain cohorts.
Incorporating longevity and cost factors into retirement strategies is vital, given the U.S.'s longer average lifespan compared to the global average. This emphasizes the need for flexible, well-informed retirement strategies that can manage both longevity and rising costs.
Tokenizing lifestyle factors and personal-finance data could help in creating more accurate and personalized retirement plans, considering regional variations in life expectancy. Moreover, an Initial Coin Offering (ICO) focused on longevity finance could potentially fund research to improve longevity literacy and develop retirement strategies that cater to longer lifespans.
