New York, NY – Americans are living longer, but the uncertainty surrounding life expectancy presents a challenge for financial planning. According to experts at the Society of Actuaries Research Institute, the age at which individuals will pass away remains a mystery, making it uncomfortable for many to prepare for their financial future.
Traditionally, the financial industry assumes an age of 95 for life expectancy projections. However, the Society of Actuaries and American Academy of Actuaries are emphasizing the importance of considering longevity risks. These risks highlight the possibility of individuals outliving their savings if they solely rely on a specific life expectancy number for planning.
To address this challenge, the Society of Actuaries and American Academy of Actuaries have launched a free online longevity illustrator. This tool helps individuals get a reasonable estimate of their life expectancy based on factors such as age, sex, retirement age, and overall health status. By offering insights into the probability of living to certain ages and the number of retirement years, the longevity illustrator aims to provide a more comprehensive understanding of longevity.
One surprising revelation from the longevity illustrator is the increased likelihood of at least one member of a couple living to age 90. This finding contradicts the industry’s norm of assuming individuals will live to age 95, as recent research shows that the projected life expectancy for those aged 65 with no chronic conditions is lower.
Chronic health conditions such as high blood pressure, cardiovascular disease, diabetes, and obesity can significantly impact an individual’s life expectancy. For instance, a healthy 65-year-old man may need around $1.1 million for retirement if he plans for an 80% income replacement rate. However, this amount could vary based on his health status, with conditions like high blood pressure potentially reducing his life expectancy and altering his retirement funding needs.
Personalizing financial plans to consider an individual’s specific health status can lead to more effective retirement strategies. While age 95 assumptions are common in the financial industry, understanding one’s personal life expectancy can offer a more realistic foundation for planning. This personalized approach can help individuals make informed decisions about their retirement savings and income strategies.