Life expectancy can have a greater impact than even record high inflation on how long your retirement savings will last

Life expectancy can have a greater impact than even record high inflation on how long your retirement savings will last

Given today’s ongoing high inflation, many Americans worry they may not have put away enough money for retirement. They fear that sharp increases in food and energy prices and transportation and medical care costs could significantly affect their retirement savings.

Yet there’s another important factor to consider: your life expectancy.

A new report from the TIAA Institute and George Washington University reveals that more than half of American adults don’t know how long people generally tend to live in retirement, which given their possible longevity could have them failing to save enough money to last as long as they themselves do.

‘Longevity literacy’ needed in retirement planning

Studies have shown financial literacy among women consistently lags that of menyet the report found the “longevity literacy” of women is greater than men, with 43% of women demonstrating strong longevity knowledge, compared to 32% of men.

It’s a “striking result,” said George Washington University economist Annamaria Lusardi, director of the school’s Global Financial Literacy Excellence Center. “We might actually need to provide help to women, because they are aware, for example, of the fact that they live long but they might not know about how to deal with their living long.”

More from Personal Finance:
Here’s the inflation breakdown for December 2022 — in one chart
Americans lean more on credit cards as expenses stay high
3 key moves to make before the 2023 tax filing season opens

In consequence, greater education about retirement planning will be especially important for women, she said.

On average, American men and women retire in their mid-60s. Yet many of them may not realize that at age 60, on average, men may live another 22 years and women could live 25 years longer, according to the Social Security Administration’s calculations.

To make your retirement money last, it is important to use a three-pronged approach, said Surya Kolluri, head of the TIAA Institute. “Some combination of Social Security, a guaranteed lifetime income [product]and then investments on top of that” might be a good way to hedge the risk of inflation and rocky financial markets, he said.

Inflation adjustments up 401(k), IRA contribution limits

Inflation adjustments for 2023 have also increased the amount of money that you can save in retirement accounts. This year, you can put up to $22,500 in a traditional or Roth 401(k), plus a $7,500 “catch-up” contribution if you’re 50 or older for a total of $30,000.

You can also put up to $6,500 in a traditional or Roth IRA. With a $1,000 catch-up contribution, you could save a total of $7,500 if you’re 50 or older.

Here are the key ages in retirement planning

As you near retirement, or if you’re already retired, there are key milestones to keep in mind for accumulating and withdrawing the money you’ll need for your later years. Considering you may live into your mid-80s, here are some other important ages to keep in mind:

SIGN UP NOW for Money 101, an eight-week learning course to financial freedom, delivered weekly to your inbox. For the Spanish version, Dinero 101, click here.

Leave a Reply

Your email address will not be published. Required fields are marked *