We apparently are living longer than we expect. That’s good news. Or it’s good news unless you underestimate the amount of retirement funds needed to live to a ripe old age. Then it’s bad news.
A person 60 ought to note they’ll live to reach 82 if they’re male and 85 if they’re female. It’s called longevity literacy and Surya Kolluri of the TIAA Institute says a quarter of us underestimate how long we’ll live.
A whopping 28% have no idea of how long people live on average. And 40% of baby boomers don’t have much of an idea either.
NerdWallet did an analysis of baby boomer retirees and found the average household has about $134,000 in retirement savings. That’s not enough — says Boston College economist, Gal Wettstein because someone retiring at 65 can expect to live to 85.
“We don’t know why people are so off in their expectations,” Wettstein said. “I think there is some evidence that people don’t account for the fact that they’ve already lived to a certain age when they try to guess how long they might live.”
He also noted most of us worry that the stock market’s volatility is our biggest retirement enemy. It isn’t, he said. The biggest worry is outliving retirement income.
Here are some interesting stats. In 1900, the average American lived to age 47. By 1950 that number was 68. Today the average lifespan is 79.
Employee Benefit Research Institute director of wealth benefits, Craig Copeland said when you ask people about age and how long people live, they have no clue. “One of the consistent things is that there were 20 percent of people who don’t know, who couldn’t give an answer,” Copeland said. “So, you’re starting out with one-fifth of people with no idea of how long they were going to live.”
Those who’ve already retired have a much more realistic outlook on longevity. Even though most are pessimistic about their futures, over half know they’ll live at least 20 years after they retired.
Copeland said people in their 50s and 60s “tend to think they’re not going to live very long, or not as long as the life expectancy of a person their age,” he said. “Where that kind of flips is in people’s 70s, which is late for making decisions about retirement.”
Women — by the way — have a better grip on age than men. Kolluri said on lifespan literacy, 43% of women answered questions about it correctly. For men, the number is just 32%.
“That concerns me because what it implies to me is that they’re incurring longevity risk, that they will outlive their money,” Kolluri said.
Source link: The Hill — https://bit.ly/3XFuc6a