Most under 45 underestimate their life expectancy.
This was the finding of a survey by the Society of Actuaries, as reported the Financial Advisor Magazine August 1, 2012.
Many people forget that the average represents the middle. That is half will live longer and half will not live that long. The life expectancy for newborn American males increased from 66.6 years to 75.7 years between 1960 and 2010. During the same period the life expectancy for newborn American females increased from 73.1 to 80.8.
A majority say they would be very or somewhat likely to make significant reductions in their living expenses if they thought they would live 5 years longer than they expected. “More than half of per-retirees would also use money they otherwise would have left to heirs or downsize their housing.”
The survey also found many underestimate their planning time-line when making major financial decisions. Retires generally look 5 years into the future and per-retirees look 10 years into the future.
The report concludes this can result in underfunding for retirement. Understanding the increased life expectancy, the current state of the economy and the volatility of the stock market require people to do a better job of managing their finances and planning for retirement.
