What is Your Life Expectancy at 65 (and How Should it Impact Your Retirement Plan)?

At birth, life expectancy for boys and girls is around 75 and 80, respectively. But did you know that every year you live, your life expectancy increases? It’s true!

So, what is the average life expectancy for a 65-year-old man and woman? 

Download: 7 Rules for Retirement Planning Success

The average 65-year-old female can expect to live to 86 years old, and males can expect to live to 83. According to the CDC, a 65-year-old woman lives an average of an additional 20.8 years, and 65-year-old men live an average of an additional 18.2 years.

What Determines Life Expectancy?

The chance of making it beyond 80 varies from person to person, depending on several factors including:

  • Your health
  • Your family’s health history
  • Your lifestyle
  • Where you live
  • Your gender

No one knows the exact ingredients of the “life expectancy cocktail” as it changes for everyone. Experts think about 75% of living to age 90 comes to your health. Beyond that, they think it’s more a question of genetics. 

Gender is clearly one of the top factors. Harvard Health asks the question, “Why do men often die earlier than women?” They list seven things that men have going against them, including being larger than women, committing suicide more often, and being less socially connected.

Even though the average life expectancy for a 65-year-old is 83 to 86 years, many individuals will live far beyond that estimate. The 2020 Census found that more than 6.3 million people in America are over the age of 85 – that’s nearly 2% of the population – and that number is only going up. The U.S. Census Bureau projects the number of people over 90 will double by the year 2050.

With all those varying factors, how can you build a retirement income plan that matches your life expectancy?

How Should Your Life Expectancy Impact Your Retirement Plan?

Knowing the average life expectancy for someone your age is nice, but as financial planners, we want to look at how it can help us make informed decisions about your retirement. After all, the greatest fear of retirees, no matter how long you live, is outliving your savings.

So, how much should you save for retirement?

The short answer: At least 20 years of income, ideally 30. Of course, you’ll have Social Security and any pension or income annuities you will receive – the rest will need to come from your retirement savings.

If, on average, your life expectancy at 65 is another 20 years, you should save at least that much money. But as we saw above, the chance of living even longer only increases. Some studies are saying that someone alive today may live to 120!

That’s why we suggest shooting for roughly 30 years worth of expenses. 

How Much Should You Save for Retirement Then?

How much money you need for 30 years depends on how you live, what you do, where you live, etc. We work with our clients to build an individualized retirement income plan based on your situation. We forget that lifestyles change and your home is an asset as you age. 

Building a Retirement Income Plan

Your retirement income plan is like a puzzle that, when fit together, creates a picture of your retirement. Your plan may include:

  • Pension (if you live in Oregon and worked for the State of Oregon, this is managed through your PERS plan)
  • Social Security
  • Retirement accounts, like your 401(k) or Roth IRA
  • Investments
  • Annuities
  • Your savings account
  • Income (if you plan to work in retirement)

Building a retirement income plan can get complicated quickly. That’s where financial advisors come in handy.

What Should Your Retirement Income Plan Cover?

Again, everyone’s retirement is different, but here are the basics that every retirement income plan should account for:

  • General expenses, including food, shelter, and transportation
  • Healthcare costs – out-of-pocket medical if retiring at 65; if early retirement is a goal, you must also plan for insurance until you reach 65
  • Long-term care costs – Medicare only covers medical or skilled nursing care. Not rent or other costs in assisted living, so your savings will need to cover this cost.
  • Entertainment and travel
  • Debt payments
  • Insurance costs, including life insurance and long-term care insurance

On top of that, your income plan needs to factor in rising inflation

Related: 8 Things to Consider in Your Retirement Plan

OK, so…How Much Should I Save for Retirement?

Sometimes we talk to people who get frustrated and just want a simple answer to what seems like a simple question: How much money do I need to save for retirement?

The simple (and incomplete) answer is this: Take your average annual spending and multiply it by 30. There’s your number. 

But that misses several things:

  • You’ll probably spend more on healthcare in the last three decades of your life than you spent before that point, but less on travel and other expenses.
  • At some point in their lives, nearly 70% of retirees will need long-term care, which can cost $6,000 per month or more.
  • You never know how much you want to spend on spoiling your grandchildren until you have the time to do it 🙂

Even with all those factors, we can still get a pretty good idea of how much you’ll need by walking through our basic retirement planning questions together.

The complicated part for most people is where you get the money. But here’s the good news: You don’t have to save every penny.

By building a diversified, holistic retirement income plan, you can be on your way to creating a plan that will provide for you well into the future – no matter how long you live.

Connect with Clarity

We’re here to help you plan the retirement of your dreams. Click here to schedule a consultation with Clarity Wealth today.

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