How Long Will I Live? Planning for Longevity in Retirement

When planning for retirement, one of the most critical yet overlooked factors is estimating how long you'll live—your longevity age. Many people rely on anecdotal observations, like when their parents or relatives passed away, to predict how long they’ll need their retirement savings to last. However, this can lead to serious miscalculations. Choosing the right longevity age is essential to ensure your retirement plan can support you throughout retirement.

Financing your retirement is complex, and longevity plays an extremely important role in determining whether your savings will be sufficient. Longevity refers to how long you could potentially live, while life expectancy is an average projection based on factors like age, gender, and health. Although life expectancy provides a general guideline, it’s important to remember that many individuals live far beyond the average. Failing to account for this possibility can expose retirees to longevity risk—the risk of outliving their money.

For couples, retirement planning becomes even more important. It’s not just about estimating how long you’ll live individually but also considering how long you'll live as a couple and how many years one partner might outlive the other. 

Life Expectancy at Age 65 vs. Life Expectancy at Birth

Many people mistakenly rely on life expectancy at birth to plan their retirement. However, life expectancy at birth includes factors like infant mortality and early-life accidents, which affect the average lifespan. In contrast, life expectancy at age 65 reflects the number of years a person can expect to live after reaching retirement age. By 65, individuals have surpassed higher-risk early years, so their projected lifespan tends to be longer than the life expectancy at birth.

For example, in the United States, life expectancy at birth in 2022 was 77.5 years for men and 81 years for women. However, for individuals who reach age 65, men can expect to live an additional 17.5 years, and women 20.2 years. This difference is critical because retirees need to plan for a longer lifespan, often well into their 80s or even 90s—far beyond what life expectancy at birth suggests.

Historical Trends in Life Expectancy at Age 65

Since 1960, life expectancy at age 65 in the United States has increased significantly due to advancements in healthcare, lifestyle changes, and better management of chronic diseases. Here’s a brief overview:

• Males:
• In 1960, a 65-year-old male could expect to live 12.8 more years, reaching an average age of 77.8.
• By 2022, this increased to 17.5 years, extending the average male’s lifespan to age 82.5.
• Females:
• In 1960, a 65-year-old female had a life expectancy of 15.8 more years, reaching age 80.8.
• By 2022, this figure rose to 20.2 years, extending the average female lifespan to age 85.2.

Both male and female life expectancies have steadily improved over the decades, though the rate of increase has slowed post-2000 due to various factors, including health disparities and the opioid crisis. While the COVID-19 pandemic caused a temporary decline in life expectancy, 2022 saw some recovery, although we are not yet back to the pre-pandemic levels. 

Global Comparisons: How Does the U.S. Rank?

The U.S. has the lowest life expectancy among large, wealthy countries while it far outspends its peers on healthcare  Life expectancy at 65 varies significantly across countries, with notable differences between men and women. For example, in Japan, a 65-year-old woman can expect to live 24.7 more years, and a man of the same age can expect 19.9 years. This highlights Japan’s robust healthcare system and longevity-promoting lifestyle. Countries like Korea, Spain, and France also exhibit high life expectancies for women, generally over 23 years.

How to Plan for Longevity in Retirement

To effectively plan for longevity, I recommend using two complementary tools: the Actuaries Longevity Illustrator (ALI) and the SSA Life Expectancy Calculator. Both provide valuable insights, but they approach longevity estimation in different ways.

• The Actuaries Longevity Illustrator estimates the probability of living to various ages rather than providing a single projection. This probability-based approach helps account for the wide range of outcomes, particularly when planning for couples, as it can estimate the likelihood of one partner outliving the other.
• The SSA Life Expectancy Calculator, on the other hand, gives a single estimate based on population mortality data. While simpler, it lacks the depth and probability-based insights that the ALI offers.

By using both tools together, you can gain a fuller understanding of your potential lifespan. This helps ensure that you set the right longevity target for your retirement plan, reducing the risk of outliving your savings.

Planning for longevity is a piece of retirement planning that cannot be taken lightly. Estimating how long you’ll live based on reliable tools and understanding how life expectancy evolves with age can help you create a secure financial future. Whether you live to the average lifespan or exceed it, having a comprehensive plan ensures that your savings will last as long as you do.