One of the biggest unknowns in planning for retirement is trying to gauge how long you should expect to live. We all have friends or family that have helped parents as their retirement savings didn’t last as long as they did. In the United States, life expectancy is just shy of 79 years (lower than most of the developed world but that is a topic for another article). However, this number would be a terrible gauge for a financial plan and instead should be much longer.
The first thing to remember is that the 79 years that is quoted is an average. That would mean that roughly half of Americans actually live longer than 79 years. An even bigger issue is that this number is relevant to individuals at the beginning of their lives. Interestingly your life expectancy increases each year that you stay alive. This makes sense as the outliers who pass away younger are no longer part of the sample and are no longer dragging down the average. So what does life expectancy look like at 65?
In this chart from JPMogan we can see that life expectancy jumps all the way up to your mid 80’s and again remember that is just the average. Roughly half of 65-year-olds will make it past 85. Two more quick notes to take from this. First is that women usually live longer than men. The second is when we use a married couple, we can take a look at the path and calculate the odds of either living past a certain point. What really stands out is that nearly 50% of couples that are 65 will live past age 90. While is difficult to predict exactly how long we will live, it is important to recognize the available statistics out there and do our best to apply them to how we plan for retirement.