The Society of Actuaries found that roughly 59% of Americans surveyed underestimate their life expectancy after retirement. As a retiree or an individual approaching retirement, this miscalculation could put your future quality of life at risk when you need it most.
The report begins by explaining a trend that many know but fail to fully understand. Americans are living longer. In the past 50 years we have seen the life expectancy of men increase from 66.6 years in 1960 to 75.7 years in 2010. For women, life expectancy is also up from 73.1 years in 1960 to 80.8 in 2010.
It is important to understand that these are averages and that the people that die decades before their retirement actually bring these averages down. This means that the older you are, the higher the probability of you having a higher than average life expectancy. As the report notes, “By age 65, U.S. males in average health have a 40 percent chance of living to age 85 and females more than a 50 percent chance. The survivor of a 65-year-old couple is more than 70 percent likely to reach 85”.
The results from the Society of Actuaries survey shine a light on a number of issues that should raise concerns about the risks in a financial retirement plan. The main concern is the short planning horizon of many of the survey respondents. This is a very serious issue, especially for people that fail to recognize how just a couple of unplanned years at the end of our lives can put tremendous stress on our financial security and that of our loved ones.
In many cases, working with a financial advisor that understands the risks associated with outliving your money can help mitigate some of the concerns raised by the survey results.
You should consult with a financial advisor if you have any questions or concerns about your life expectancy assumptions and/or retirement strategy.
For a copy of the report, please visit the Society of Actuaries website www.SOA.org.
source: Society of Actuaries (www.soa.org) photo credit: Guerrilla Futures | Jason Tester