If you’re like the typical person, you probably have a good idea of when you want to retire. But have you put much thought into how long your retirement is set to last? Unlike a sabbatical or other major financial goals, it’s not always clear how long it will last because your retirement timeline depends on your life expectancy. When you’re thinking about retirement, it’s important to consider your longevity.
Are lives getting longer?
For decades, longer life spans seemed like a given. In the year 1900, a woman born in the US could expect to reach age 48.31. Fast forward sixty years, and a person born in the United States 1960 had a life of 69.8 years according to data from the World Bank.2
The trend of longevity marched upwards with a rare tick downwards until the last five years. In 2014, life expectancy in the United States hit an all time high (78.8 on average), and expectancy has plateaued or fallen in the subsequent years.3
While the plateau in life expectancy may be concerning, it is worth looking a bit deeper into the numbers. Between 2016 and 2017 death rates for 7 out of the 10 leading causes of death increased in the United States. The three causes that increased the most were Flu and Pnemonia(5.9%), unintentional injury such as a drug overdose (4.2%), and suicide (3.7%).4
Most health related causes of death are difficult to avoid. But other causes, including unintentional injury and suicide are somewhat more avoidable. These death causes are linked to epidemics in drug use and loneliness.5 One key to living longer (and a more fulfilling life) is to plan for ways to stay engaged in your family and in building up your local community.
The steady march towards longer lives seems to have plateaued recently, but life expectancy is still near all time highs. According to data from the Social Security Administration, 77% of men and 86% of women will live until their full retirement age of 67.6
How much longer do you expect to live?
Whether overall life expectancy is growing or plateaued is an important societal question. But for aspiring retirees, understanding their specific life expectancy is even more important than understanding average life expectancy. When you’re on the brink of retiring, it’s helpful to understand if you’re more likely to live to age 75 or age 105.
Nobody knows the answer for sure, but there are some methods for making a best guess. The social security administration keeps lots of data on births, deaths and longevity. You can use this tool from the SSA to estimate how much longer you’ll live. According to the tool, a man born on January 21, 1959 can expect to 22.2 more years from today. That puts his life expectancy to 83.2.7
However, if he makes it to age 70, he will expect to live 15.8 more years to age 85.8.8
Getting a good sense for your remaining life expectancy can help you make prudent planning decisions while also making the most of your life span. The Retirement Budget Calculator helps you plan cash flow throughout your retirement, and it includes the ability to forecast your budget through the remainder of your lifespan.
It may seem odd to predict the date of your death, but knowing your life expectancy can help you predict whether you’ll outlive your savings or your savings will out live you.
Will you outlive your savings?
While data from the Social Security Administration isn’t a perfect way to estimate the length of your retirement, it is a useful place to start. When you use the retirement budget calculator, you can see a table that forecasts your cash inflows and outflows throughout the remainder of your expected life.
If the Retirement Budget Calculator shows that your nest egg dips below $0 before your expected death (or your partner’s expected death), you run a high risk of running out of money during retirement.
In 1969, when life expectancy was just 69 years, saving for 4-5 years of additional life may have been sufficient for retirement. But today, most people who live to retirement age will make it to age 85 or older. Adjusting your cash inflows (by working longer or saving more now) or your outflows (by cutting back on discretionary expenses) can help you find a way for your money to last the two decades or more that it may need to last.
Are your savings likely to outlive you?
Less frequently, you may be someone who realizes that your savings are very likely to outlive you. Perhaps, SSA estimates you have 17 more years to live, but the Retirement Budget Calculator shows that you have enough money to last until age 120. What should you do?
Seeing the excess cash flow may convince you that spending extra money today to enjoy time with loved ones or to indulge a passion (such as travel or expensive vehicles) could be well worth the money.
Planning for your real life expectancy in retirement
No retirement plan can be perfect, but avoiding the reality of your longevity will not help you one bit. The Retirement Budget Calculator can help you take a detailed look at your spending habits, your expected income in retirement, and your personal expected lifespan. It can give you a more detailed view of how your finances are likely to look in retirement.
Whether you’re already retired, planning to retire soon, or still a few decades away from retirement, understanding your expected longevity can help you plan for a rich life today and for years to come during retirement.
- Life expectancy at birth, at 65 years of age, and at 75 years of age, by race and sex: United States, selected years 1900–2007, Center For Disease Control, https://www.cdc.gov/nchs/data/hus/2010/022.pdf, Accessed February 5, 2020
- Social Security Actuarial Life Table, 2016, https://www.ssa.gov/oact/STATS/table4c6.html Accessed February 5, 2020
- Social Security Actuarial Life Table, 2016, https://www.ssa.gov/oact/STATS/table4c6.html Accessed February 5, 2020
- Mortality in the United States, 2017, https://www.cdc.gov/nchs/data/databriefs/db328-h.pdf, Accessed February 5, 2020.
- Mortality in the United States, 2017, https://www.cdc.gov/nchs/data/databriefs/db328-h.pdf, Accessed February 5, 2020.
- Social Security Actuarial Life Table, 2016, https://www.ssa.gov/oact/STATS/table4c6.html Accessed February 5, 2020
- Retirement & Survivors Benefits: Life Expectancy Calculator, https://www.ssa.gov/OACT/population/longevity.html, Accessed February 5, 2020
- Retirement & Survivors Benefits: Life Expectancy Calculator, https://www.ssa.gov/OACT/population/longevity.html, Accessed February 5, 2020
