Dozens of factors contribute to how enjoyable your retirement years are, but one of the most important is how long your money will last. If you have little to nothing saved for the future or if you're retired for longer than you planned to be, you'll likely be left to depend on Social Security benefits alone -- which may or may not be enough to pay the bills.
Life expectancy: A crucial piece of the retirement puzzle
The average adult over the age of 50 who is not yet retired expects to live until around age 83, a survey from the Nationwide Retirement Institute found. However, the average life expectancy for men and women is around 87 and 89 years old, respectively, according to research from LIMRA. A third of U.S. adults turning 65 years old now can expect to live past age 90, the Social Security Administration predicts, and one in seven is expected to make it past age 95. In a few decades, those numbers might be even higher.
A difference of four to six years might not sound like much, especially when you're spending a couple decades in retirement already. But if you're spending, say, $50,000 per year, if you live four to six years longer than you anticipated, that can amount to an extra $200,000 to $300,000. If you're not prepared, you could spend your last few years of retirement struggling to make ends meet.
Also, considering that your healthcare expenses may increase as you age, you're essentially hit with a double whammy if you run out of money. Not only are your costs higher, but you don't have money left for those increasing expenses.
How to plan for a longer retirement
More years in retirement means you'll likely need more savings, but just how much more do you need? While you don't want to risk running out of money in retirement, you also don't want to work yourself to the bone to save more than necessary and end up not enjoying your golden years as much as you'd hoped.
While you can't predict exactly how long you'll live, you can make a rough estimate. Take an honest look at your and your family's health history. If everyone in your family has lived into their 90s and you're also in tip-top shape, it may be a good idea to prepare for a long retirement. But if you have health issues or if certain conditions run in your family, you may not need to save for quite as many years.
Once you have an idea of how long you can reasonably expect to live, you can adjust your retirement plan accordingly. This might mean making some sacrifices to increase your savings so that you have enough to last the rest of your life, or you might plan on working a few extra years to strengthen your retirement fund. Especially if you're healthy and expect to live to a ripe old age, you may choose to continue working into your 70s to save more money and still enjoy a decades-long retirement.
Another way to increase your income for life is to hold off on claiming Social Security benefits. You're allowed to begin claiming benefits as early as age 62, but the longer you wait (at least until age 70), the more you'll receive each month. If you anticipate only living until your late 70s or early 80s, claiming early may be the way to go so that you can make the most of your benefits while you can. But if you expect to live a long time, it might be more beneficial to delay claiming until age 70 to receive those bigger checks for the rest of your life.
As you're planning for retirement, make sure you're estimating your life expectancy as accurately as possible. By doing so, you're giving yourself the best chance at living your ideal retirement life.