Try your hand at this one-question quiz: How long is a 65-year-old American woman likely to live?
A) About 17 years and up to the age of 82
B) About 22 more years, up to the age of 87
C) approximately 27 years and up to the age of 92
According to a new report from the TIAA Institute, the research arm of the financial services nonprofit, only one-third of us know the correct answer, which is B.
The survey found that longevity literacy is low among American adults, and this lack of knowledge has a serious impact on our retirement.
According to federal statistics on life expectancy, the average American will live approximately 78.4 years.
But life expectancy increases with age. According to a Social Security life expectancy calculator, a person who turns 65 today can expect to live 19.3 more years, reaching age 84. A woman aged 65 will live an average of 21.9 years longer.
The longevity numbers reported by the CDC, which we learn about in school, are calculated at birth. But from there life expectancy increases. Simply put: The longer you live, the longer you will live.
Most Americans Don’t Know How Long Retirement Lasts
Many of us do not understand the basic concept of longevity. As adults, most of us don’t know how long we are likely to live. And we underestimate.
In the TIAA survey, which reached 3,371 adults in January, only 33% chose the correct answers to multiple-choice questions about life expectancy for a man and woman at age 65. Of the rest, 32% chose the lower number, while 13% chose the higher, and 22% said they did not know.
There is a clear connection between how long you will live and how long your retirement will last. People who underestimate their life expectancy plan for a shorter retirement. And that could be a costly mistake.
In the TIAA survey, people who underestimated life expectancy also predicted that their retirement would be relatively short. More than half of that group said they expect to live less than 20 years after retiring.
That estimate is also probably very low.
The average American worker retires at age 62, according to survey data from the Transamerica Center for Retirement Studies.
According to longevity statistics, a person who retires at age 62 can expect to live about 21 more years. A woman is likely to live longer than this.
What is the right period for retirement planning?
Retirement planners routinely advise their clients to plan for a longer-than-average retirement. Why? Because your retirement plan needs to cover every scenario, including the scenario where you or your spouse survives to age 95.
“Life expectancy is a fundamental component of retirement planning that we have socially avoided for too long,” said Katherine Collinson, CEO of the Transamerica Center.
“The real risk is that savings will be wiped out,” Collinson said.
According to research from the Transamerica Center, Americans fear running out of their savings as much as any other potential retirement shock, including poor health.
Another 2025 survey from Allianz Life says Americans fear running out of money more than death.
In fact, depending on finances and life expectancy, about 40% of American households are “at risk of not being able to maintain their standard of living in retirement,” said Anqi Chen, associate director of savings and household finances at the Center for Retirement Research.
Many financial planners assume a 30-year retirement. If you retire at age 62, the plan will cover expenses till age 92.
The TIAA report found that Americans who expect to retire 30 years or more are more likely to save for retirement, and they are apt to save at higher rates.
“If people are longevity-literate, they think more about their savings, they save more and they feel better about the outcomes,” said Surya Kolluri, head of the TIAA Institute.
Millennials and Generation X lack longevity literacy
The TIAA survey found that middle-aged Americans, Millennials and Generation
The survey found that men are more likely than women to underestimate life expectancy.
Colluri suspects that Americans who are near retirement, or who have already retired, have “acute” views on longevity. As far as gender differences are concerned, he cites women’s traditional role as caregivers.
“Proximity to the subject gives the individual a better understanding of life expectancy,” he said.
When Americans underestimate life expectancy, Colluri said, they often rely on subjective measures: their own health issues, or the age at which their parents or grandparents died. But due to advances in medical care and healthy lifestyles, life expectancy has continued to increase with successive generations.
“You are not your grandparents,” he said.
This article originally appeared on USA TODAY: How long does retirement last? Most of us don’t know
Reporting by Daniel De Vis, USA TODAY/USA TODAY
USA TODAY Network via Reuters Connect