Life expectancy 75, 87, 95? – how does it get calculated?

30 Apr 2021

Life expectancy estimates help us to know how much to save for retirement and also how much we can spend. Some insurance companies estimate that the average male will live till 87 and female till 91. Others say 95 is a good number to go on. The world bank says life expectancy is 70 for a male and 75 for a female. And married couples in retirement tend to live longer than single retirees.

There are so many estimates, how can we know which is the right one? Does it really matter when we die?

The age at which we die, has a serious impact on our pension pay out. According to the head of Retirement research at Morningstar, 

  • a retirement lasting 20 years allows for 4.7% withdrawal of a nest egg in the first year and a good chance that the 90% of the capital will last. 
  • for a 30-year retirement, the initial drawdown would be 3%. 
  • this means the 20-year retirement would need about $532 000 saved as opposed to $833 000 for a 30-year retirement.

Professionals with higher qualifications and salaries tend to live longer as they have access to better health care and generally lead healthier lifestyles. As the middle class around the world grows so does life expectancy.

It’s not just about the age at which we die that matters, but also the age at which we retire. We need to determine the life span of our retirement and if we can afford it. There is nothing worse than running out of money in the later years of your retirement.

Financial advisers tend to be conservative when it comes to planning your retirement. They take the insurance estimates which usually show the higher death age. This way there is a buffer and your retirement should last you for the duration of your retirement years. 

  • Calculate your pension pay out on older life expectancy estimates – this way you won’t run out of money.
  • If you want to retire earlier, you might have to lower your retirement lifestyle to keep you in the money.
  • Consider contributing more into your pension to ensure you can achieve the retirement lifestyle you want.
  • Perhaps even delay retirement for a few years to build your pension pot so you can live the lifestyle you want.

It is vital that you chat to your adviser about when you plan on retiring and the kind of lifestyle you want to lead, so they can construct a clear and precise retirement savings plan of action for you to achieve these goals. [email protected]

Please note, the above is for education purposes only and does not constitute advice. You should always contact your deVere adviser for a personal consultation.
* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.