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Estimating your life expectancy is an important retirement planning step.
How long can retirees expect to live in retirement? It’s an important question that’s often misunderstood.
Surprisingly, most people underestimate how long they might live, which can be a serious challenge if they want to make their money last for the rest of their life. Let’s look at how you can use life expectancy calculations to plan better for your retirement.
What Is The Life Expectancy In The US?
You might have recently read a report in the media that average life expectancy in the United States is 77.5 years for men and women combined. According to that report, life expectancy is 80.2 years for women and 74.8 years for men.
However, it would be a mistake for pre-retirees and retirees to base their retirement planning on these numbers. The reason is that published life expectances are calculated from birth and take into account everybody who dies in childhood and adulthood.
Instead of focusing on these numbers, pre-retirees and retirees should consider their remaining life expectancy given their current age. After all, anybody who survives to their 50s and 60s is in a more exclusive “longevity club” compared to everyone who’s born.
For example, the actuaries at Social Security publish a table that shows the expected remaining years of life at various ages. According to their table, for instance, the average remaining lifespan for a 65-year-old woman is 19.66 years, reaching 84.66 years old in total. The remaining lifespan for a 65-year-old man is 16.94 years, reaching 81.94 years in total. Both remaining life expectancies are several years higher than life expectancy at birth.
Plan For Uncertainty About How Long You Could Live
Another misconception is thinking that your life expectancy is your destiny. In fact, life expectancy calculations are just averages, and there’s considerable variation around these averages. It’s entirely possible you could live several years beyond your life expectancy or fall several years short.
The uncertainty around how long you could live is a significant challenge to successfully planning your retirement. As a result, it’s prudent to base your planning on living several years beyond your life expectancy.
Better yet, develop sources of retirement income that last the rest of your life, no matter how long you live. Examples of these sources include Social Security, traditional monthly lifetime pensions, and lifetime annuities or protected income products sold by life insurance companies. With these retirement income sources, it doesn’t matter to your retirement budget if you live much longer than the average life expectancy; you’ll still receive your retirement paycheck each month.
Your Life Expectancy Should Reflect Your Circumstances
It turns out that there are many factors that influence how long you could live, including your race or ethnicity, your health status, your family history, whether you smoke or abuse alcohol, and the state you live in.
Recent research on longevity is showing two more significant influences on your expected lifespan: your income/wealth and your educational attainment. It turns out that there’s a growing “life expectancy inequality”: People with above-average income or educational attainment are living much longer than the averages you read in the media.
How Can You Calculate Life Expectancy?
Any life expectancy calculation estimates the probability that you’ll survive to each age in the future and then averages the result. If you’re trying to determine how long you might live, you’ll need to make assumptions about the chances that you’ll survive to each future age. If you think that’s a calculation better suited for a computer, you’re right!
There are several free life expectancy calculators available on the internet. Each calculator asks some questions about the above influences on your lifespan in order to personalize the calculation to your circumstances. The more questions the calculator asks, the more personalized the resulting life expectancy calculation will be.
Calculators provide interesting insights into life expectancy calculations. I encourage you to use a few different calculators, which will likely provide you with different answers because life expectancy calculations are an inexact science. However, you’ll at least get a general idea of how long you could live.
You may also want to recalculate your life expectancy from time to time, since the answer will change as you age and as your circumstances change.
What’s The Best Age To Retire For Longevity?
How does working affect your life expectancy? Does working longer shorten or lengthen your expected lifespan? It’s a tough question to answer, since it’s difficult to measure life expectancies separately by people who work in their later years vs. people who are fully retired.
However, it turns out that recent evidence on this topic is nuanced—you could live longer if you can find “good work,” which is work that gives you social connections, is low-stress, pays enough money for you to live on, and possibly offers health insurance. On the other hand, you might die sooner with “bad work”: work that’s stressful or physically dangerous.
The best answer is to work long enough to build sufficient financial resources to last the rest of your life, no matter how long you live. Lack of money can cause stress that could shorten your lifespan.
You’ll also want to build a life in retirement that’s fulfilling and enjoyable, with robust social connections. This can help improve your health, which in turn can increase your lifespan.
Estimating your lifespan can deliver an important wakeup call for you to take the time to properly plan for your retirement. You can use the results for your financial planning so you make sure you have enough money to last the rest of your life, no matter how long you live.
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