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Erik Pickett (Photo: Club Vita)

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Bad Retirement Savers Expect to Die Young

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What You Need to Know

  • Club Vita helps employers, insurers and other pension risk transfer players analyze longevity risk.
  • It calculated survey taker life expectancies using demographic factors such as age but without using health status details.
  • The average life expectancy estimation pessimism gap was 5.3 years for U.S. women and 1.3 years for U.S. men.

What workers think about their retirement savings is closely related to how long they think they will live, according to a new Club Vita life expectancy survey.

Workers who said that their savings would be enough to pay for a comfortable retirement agreed with Club Vita about how long they might live.

Workers who said their savings would be too small to pay for a comfortable retirement predicted that they would die about 7.1 years earlier than Club Vita would have predicted.

Club Vita

Club Vita is a firm that helps employers, insurers and other players in the pension industry analyze “longevity risk,” or the possibility that workers might live much longer than expected and cost a pension plan or annuity issuer much more than expected.

The firm based its new worker life expectancy analysis on survey responses from 3,000 workers, ages 40 through 60, in its three main markets: the United States, Canada and the United Kingdom.

The workers answered the questions in December 2021, shortly after the COVID-19 delta variant had caused a big surge in deaths, and just as the COVID-19 omicron variant was starting to get attention.

The Overall Life Expectancy Prediction Gap

Club Vita calculated each survey participant’s life expectancy using standard demographic information, such as age, sex and location, but without using information about the participant’s lifestyle, chronic health conditions or exposure to COVID-19.

Typical participants were much more pessimistic about their life expectancy than Club Vita.

Club Vita was 6.1 years more optimistic about life expectancy than the average female participant and 2.5 years more optimistic than the average male participant.

In the United States, women were 5.3 years more pessimistic than Club Vita, and men were 1.3 years more pessimistic.

Longevity Pessimism and Savings Pessimism

Club Vita analysts say in the report that they believe that the participants are more likely to be underestimating their life expectancy than that their tables are too optimistic.

The participants who are pessimistic about their retirement savings may know less about their life expectancy because they have spent less time on retirement planning, the analysts suggest.

Erik Pickett, a Club Vita actuary who worked on the report, said in an email interview that the engagement gap could make the effects of the retirement preparation gap even worse.

“Those who are least financially prepared for retirement also seem to be the people who are worst at estimating how long they will live in retirement,” Pickett said. “This could create a real polarizing effect for retirement planning.”

What It Means

For financial professionals in the individual market, the Club Vita report suggests that one important service you can provide is to give clients a rough idea of how long they can expect to live.

Whatever happens to interest rates and stock prices, clients might be able to improve their life expectancy by eating better and exercising more.

Accurate life expectancy and premature death risk estimates could also help clients with matters such as buying life insurance and with funding 401(k) plans, IRAs, annuities and other retirement savings arrangements.

Erik Pickett (Photo: Club Vita)


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