People Are Living Longer — Will Your Money Last? | American Funds

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By the Numbers

DECEMBER 12, 2016

People Are Living Longer — Will Your Money Last?

A new report from the Society of Actuaries says the average 65-year-old today can expect to live well into his or her 80s. As you’re saving for retirement, keep those numbers in mind.

87.8 years — Life expectancy for a 65-year-old female, according to new data from the Society of Actuaries

Here’s the good news: We’re living longer. Here’s the tougher news: We need to plan for 20 years, or more, in retirement.

A new report from the Society of Actuaries (SOA) shows the average 65-year-old woman is expected to live to be 87.8 years, while the average 65-year-old male is expected to reach 85.8.

While life expectancy declined somewhat from 2015, these “are still significant numbers,” said Andrew Peterson, senior staff fellow at the nonprofit actuarial organization.

Life expectancy for both men and women has been rising steadily over the last century, spurred by advances in medicine and a decline in the number of Americans who are smokers. That’s a good trend.

But as life expectancy rises, so do the chances that you won’t be able to do what you might want to do when you retire or, worse still, run out of money altogether.

More and more, retirees want to make the most of their retirement years — and those leisure activities will require the appropriate savings.

Baby boomers spend $120 billion annually on leisure travel, according to a study by AARP. Likewise, a recent survey of mutual fund investors in American Funds “Voice of the Investor” panel found that retirees intend to spend more of their savings over time on items such as travel and major purchases.

Understanding how long you might live has never been more important. As pensions become a thing of the past, Americans are increasingly shouldering the burden of saving for retirement on their own.

With a better handle on your potential lifespan, you might choose to work longer, delay claiming Social Security benefits to get larger payouts down the road, or contribute more to a workplace retirement plan.

Keep in mind that longevity statistics are simply averages and you might end up living longer, or less, than the average.

“If you plan simply for life expectancy, you’re planning for a 50% failure rate,” Peterson said.

 

 


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