For years, retirees have envisioned leaving the workforce around age 65 and living out the next 10 or 20 years while enjoying grandchildren, or travel, or hobbies. But as retirees live longer and look to insure against longevity risk, reverse mortgages are one option worth considering, according to a recent article from USA Today.
We already know that the average retirement age is increasing. But how about the actual amount of time a person will live? Many have planned financially based on their guesses about how long they might live, writes USA Today in an article this week by Robert Powell. But in most cases, their guesses are way off, Powell writes.
In fact, financial advisers today are basing retirement-income plans on longevity estimates that have men living until age 91 and women living until age 94, according to a recent InvestmentNews survey.
Actuaries offer tools to help people estimate the probabilities that they will live to certain ages, finding that expected lifespans today are far greater than they were several decades ago, Powell writes. The idea is that retirement plans need to account for longer lifespans, and in some cases, much longer lifespans than most people expect.
“Many people do not understand longevity well, and those people who plan often do not plan for long enough,” Anna Rappaport, president of a retirement consulting firm and chair of the Society of Actuaries (SOA) Committee on Post-Retirement Needs and Risks tells USA Today.
According to the SOA, the probability today that a 65-year-old male will live to be 93 is 25%. Likewise, that a 65-year-old woman today will live to be 96 carries the same percent chance.
Some planners recommend a fixed horizon, such as 95 years, USA Today writes.
Written by Elizabeth Ecker