Running out of funds in retirement

A flawed understanding of the average life expectancy (which the U.S. Census Bureau places at 78.5 years) could be one of the reasons for the lack of financial preparedness. The figure does not tell the whole story. The Census Bureau gets its figure by measuring life expectancy from birth. When life expectancy is measured from age 65, things change.

The average life expectancy for a person who reaches the age of 65 is 83 for males, 86 for females. LIMRA purports that the proper way to interpret these statistics is to assume half of males who reach age 65 will live past 83 and half of the females who reach that age will live past 86. Half of all couples who reach age 65 will have one partner hit 90.

LIMRA stresses that the key is education and guidance. The impetus falls on the advisor to a certain extent. It is crucial they clearly explain the possibility of outliving one’s assets to their clients. Even disciplined planners with advanced strategies can outlive their assets. LIMRA suggests advisors begin to seriously discuss products with guaranteed income solutions, such as annuities with their clients.