{"id":9891,"date":"2023-09-17T16:16:22","date_gmt":"2023-09-17T20:16:22","guid":{"rendered":"https:\/\/kerryhannon.com\/?p=9891"},"modified":"2023-09-17T16:52:59","modified_gmt":"2023-09-17T20:52:59","slug":"understanding-how-long-you-might-live-is-a-key-to-retirement-planning","status":"publish","type":"post","link":"https:\/\/kerryhannon.com\/?p=9891","title":{"rendered":"Understanding how long you might live is a key to retirement planning"},"content":{"rendered":"
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Most Americans are clueless about a key metric needed to adequately plan for retirement: how long they are likely to live.<\/span><\/div>\n<\/div>\n
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Just over a third (35%) of Americans knew the average lifespan of retirees, according to a\u00a0report\u00a0<\/a>out this week from the TIAA Institute and the Global Financial Literacy Excellence Center at the George Washington University School of Business. And only 12% knew the right responses to a basic quiz designed to gauge longevity literacy.<\/p>\n

Read on Yahoo Finance<\/a><\/p>\n

These were: The average number of years individuals live upon reaching age 65, the likelihood among 65-year-olds of living to at least age 90, and the likelihood among 65-year-olds of not living beyond age 70.<\/p>\n

Understanding average life expectancy can help you have a ballpark concept of what could be in the cards, and that\u2019s huge when it comes to putting together a retirement plan to have enough funds to live comfortably in what could be three decades after you step out of the workforce.<\/p>\n

“Our research shows us that we need to reframe how we plan for retirement,” Surya Kolluri, head of the TIAA Institute, told Yahoo Finance. “Rather than saying, \u2018hey, what is my target of savings when I get to retirement, the real question is how should I plan for this income to last the rest of my life? And what does my lifespan look like?”<\/p>\n

Knowing the answers to the questions matters. People with strong levels of longevity literacy \u2014 both retirees and those still working \u2014 are far more prepared for retirement, according to the data, which is based on a survey completed online in January by 3,503 US adults, ages 18 and older.<\/p>\n

Roughly seven in 10 workers who have strong longevity literacy are confident about having enough money to live comfortably throughout retirement, compared with about five in 10 of those with weak literacy, according to the study.<\/p>\n

And half have determined how much they need to save for retirement, compared with a third of those with weak longevity literacy. Of note, 72% of those with high longevity literacy are saving for retirement on a regular basis, compared with 58% of those with weak longevity literacy, the researchers found.<\/p>\n

“If people have a sense for how long they’re going to live, their mindset and their behavior changes,” Kolluri said.<\/p>\n

Read more: Top savings tools: 4 alternatives to savings accounts<\/em><\/a><\/p>\n

Retirees with longevity acumen are also ahead of the game.<\/p>\n

The study found 77% of retirees who scored high on the longevity literacy test say their current lifestyle meets or exceeds their pre-retirement expectations, compared with 62% of those with weak literacy. And 82% say they\u2019re confident they have enough money to live comfortably throughout their retirement, compared with 69% of those with weak literacy.<\/p>\n

“Retirement is kind of an old term,” Kolluri said. “You have got to take longevity into account in how you want to live your life, do you want to continue work in some way, where you want to live, and what kind of activities you want to pursue. Money is the underlying facilitator for the life we want to live across a variety of dimensions.”<\/p>\n

What the wrong answers mean<\/strong><\/h2>\n

“Those who could not answer the questions correctly are working basically with not enough information, not enough knowledge to plan for that uncertain time period after reaching retirement age,” Andrea Sticha, the lead researcher with the Global Financial Literacy Excellence Center, told Yahoo Finance.<\/p>\n

And women tend to get this concept better than their male counterparts. “What we see in terms of the gender gap is that men are more likely to show weak longevity literacy than women,” she added.<\/p>\n

Still, findings from the\u00a0research<\/a>\u00a0report, “Longevity as Opportunity \u2013 New Conversations on Work, Finances, and Well-Being” from Transamerica and the Massachusetts Institute of Technology AgeLab, reveals how planning for longevity can create a bleak “I\u2019ll never be able to retire” attitude.<\/p>\n

A third of folks reported that they did not expect to be able to retire, and were prepared to continue working in later life. Three-quarters, however, of those aged 40 to 59 said it is very or extremely important for them to save enough money to be able to stop working eventually. And two-thirds of people still working in their 60s and 70s said retirement was very or extremely important.<\/p>\n

“Understanding longevity is vital in retirement planning as it guides the length of time for which you should prepare financially,” Phil Eckman, president of workplace solutions at Transamerica, told Yahoo Finance.<\/p>\n

“The longer you live, the more years your retirement funds need to cover. This understanding can lead to more complex financial planning, which includes strategies such as delaying retirement, saving more, investing wisely, and possibly working part-time during retirement. It also necessitates considering\u00a0healthcare costs<\/a>\u00a0that will likely increase as you age.”<\/p>\n

The research is based on 10 focus groups with a total of 69 people conducted in September 2022 and a national US survey conducted in December 2022 of 1,184 people.<\/p>\n

‘Beyond pickleball and beach walks\u2019<\/strong><\/h2>\n

“Increased longevity changes everything,” Joseph Coughlin, director of the AgeLab<\/a>\u00a0at MIT, told Yahoo Finance. “It is not just about more time, it adds more complexity.”<\/span><\/p>\n