A new report questions the longevity of most participants and asks whether planning for a long-term retirement is realistic.
The research, “Retirement Planning, Longevity & Health. Does It Make Sense to Plan to 95?” by retirement healthcare cost data aggregator HealthView Services, probes the long-held notion of planning for a retirement well into the 90s, and examines whether most participants will actually live until age 95.
The report provides health-based actuarial data from 266 million cases to reveal the average life expectancy for healthy 65-year-old retirees as well as those with high cholesterol, high blood pressure, cancer, diabetes, obesity, and tobacco users.
The findings note that life expectancy for those with chronic conditions tends to be lower. Currently, HealthView Services finds that 95% of Americans older than age 60 suffer from at least one chronic disorder. For example, for those living with diabetes, the probability of reaching age 95 was less than 1%.
Even the healthiest 5% of retirees only have a one-in-five chance of reaching this age, the research reports. The data shows that women who have no chronic disorders, on average, lived until age 90. For men, this was lower at age 88.
In separate data from the Centers for Disease Control and Prevention (CDC), average life expectancy reached age 77, however women tend to live longer, until age 80 compared to 74 for men.
Experts say the research underscores the importance in assessing longevity data when creating financial plans, especially as more participants are concerned about building enough retirement savings that will last them decades after leaving work.
“The starting point for building longevity into retirement plans should be actuarial data based on health condition,” said Ron Mastrogiovanni, CEO of HealthView Services. “It provides a foundation for clients and advisors to choose the life expectancy they incorporate into planning tools to address longevity risk, and helps set realistic retirement horizons for the vast majority of individuals over age 60 with chronic conditions.”
In one case study by HealthView Services, a 65-year-old man who achieves an income replacement ratio (IRR) goal of age 95, but then changes it to age 86 after being diagnosed with high cholesterol, could potentially spend an additional $447,000 in retirement.
Similarly, a 55-year-old woman who has diabetes and is aiming to meet her IRR savings goal based on her actuarial longevity would not require the same level of savings as her healthy counterpart, who is expected to live significantly longer, HealthView Services reports.
However, advisors and their clients should not solely rely on data when organizing a retirement plan—the needs of a surviving spouse, ensuring funds are available for long-term care and healthcare, and the desire to leave behind a legacy to others is also important to consider, adds the research.
“Using actuarial longevity versus age 95 as a planning goal is not a zero-sum game,” added Mastrogiovanni. “Since clients have different risk appetites, levels of wealth, and sources of retirement income including Social Security, using health-based actuarial life expectancy for planning provides a way to dynamically balance the goals of living life to the fullest and managing longevity risk.”
SEE ALSO:
- John Hancock Working with MIT AgeLab on Longevity Innovation, Research
- Longevity Planning Across Generations
- Americans In the Dark With Longevity Literacy
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
