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“Key Findings and Issues: Longevity” is a comprehe “Key Findings and Issues: Longevity” is a comprehensive analysis from the Society of Actuaries’ 2011 Risks and Process of Retirement Survey, revealing how poorly most Americans understand longevity risk—the financial, emotional, and practical risks associated with living longer than expected. Based on interviews with 1,600 adults aged 45–80, the report exposes major gaps in financial planning, life expectancy knowledge, risk management behavior, and preparation for long retirements in an era of rising life spans.
The report shows that Americans are living longer than ever, yet underestimate life expectancy, fail to plan far enough ahead, and often misunderstand the consequences of outliving their savings. With defined-benefit pensions declining, volatile markets, reduced home equity, and longer lifespans, personal responsibility for retirement security is growing—while awareness and preparedness lag behind.
Core Insights & Findings
1. Americans Consistently Underestimate Longevity
More than half of retirees and nearly half of pre-retirees underestimate average life expectancy by several years.
40% of men age 65 will reach 85
53% of women will reach 85
The survivor of a 65-year-old couple has a 72% chance of living to 85
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Yet many believe they will die earlier, leading to inadequate savings strategies.
2. Planning Horizons Are Far Too Short
Most people plan financially only 5–10 years ahead, even though they may live 20–30 years in retirement.
Only 11% of retirees and 19% of pre-retirees look 20+ years ahead.
This disconnect puts long-term financial security at risk.
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3. Longevity Risk Is Not Understood
Key behavioral issues include:
Belief that “average life expectancy” means most people die at that age—rather than half living longer
Limited understanding of variability around the average
Poor recognition of inflation risk, cognitive decline, and late-life health costs
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4. Health, Disability, and Longevity Are Interlinked
Research cited shows that a healthy 65-year-old man will spend:
80% of remaining life non-disabled
10% mildly disabled
10% severely disabled
Women face higher disability burdens.
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This has major implications for long-term care needs.
5. Most People Do Not Use Longevity-Protective Financial Tools
Few adopt risk-pooling strategies such as:
lifetime annuities
delaying Social Security to increase benefits
Only 39–40% of respondents use or plan to use annuitized income options.
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Instead, they rely heavily on:
cutting spending
saving more
eliminating debt
—strategies that may be insufficient for long lifespans.
6. Inflation Risk Is Better Understood Than Longevity Risk
43% of retirees and 47% of pre-retirees believe inflation will affect them "a great deal"
Yet they underestimate how much long lifespans amplify inflation risk
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7. Family History Dominates Longevity Expectations
Most people base life expectancy estimates on family history, even though lifestyle and health behaviors matter equally or more.
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8. Living 5 Years Longer Would Cause Financial Stress
If people live five years longer than expected:
64% of retirees and 72% of pre-retirees would need to cut spending
Many would deplete savings or tap home equity
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Broader Themes and Context
Aging Trends
Life expectancy has risen ~2 years per decade for men and ~1.5 years per decade for women (1960–2010).
Declining pensions, volatile markets, and rising personal responsibility increase longevity risk.
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Why Longevity Risk Matters
Longevity is the only retirement risk you cannot self-insure.
Problems include:
Outliving savings
Cognitive decline affecting financial decisions
Greater exposure to inflation
Higher medical and care costs
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Expert Perspectives
The report includes actuarial commentary that:
warns of widespread misunderstanding of life expectancy
highlights how cognitive decline impairs financial decision-making
emphasizes the need for long-term, realistic planning horizons
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Overall Conclusion
This report reveals a striking mismatch between rising longevity and low preparedness. Americans generally plan too little, save too late, underestimate their lifespan, misunderstand longevity variability, and rely on strategies that won't sustain them through potentially decades of retirement. The Society of Actuaries stresses that improving financial literacy, extending planning horizons, and adopting risk-pooling tools (annuitization, delayed Social Security) are essential steps for surviving—and thriving—during longer lifespans.... |