A lot of planning goes into preparing for retirement and one of the most critical aspects is determining how much to save.
The average worker estimates retirement will cost roughly $1.7 million, according to a survey from Charles Schwab, but your retirement number could vary significantly. Factors such as your general living expenses, your desired retirement lifestyle, and where you live all play a part in how much you should save.
But there's one crucial factor many Americans are overlooking, and it could potentially wreck your retirement plans.
The key to enjoying retirement to the fullest
As you're figuring out how much you should save for your senior years, you're likely considering how many years you'll spend in retirement. However, many people underestimate this figure, which could cause serious problems down the road.
The average 65-year-old today can expect to live to approximately age 85, according to the Social Security Administration. However, a report from the Center for Retirement Research at Boston College found that among those ages 65 to 69, only 58% of men and 64% of women believe they'll live to age 80.
In other words, nearly half of older Americans estimate they won't make it to age 80 or beyond, despite the fact that the average senior can expect to live to age 85. Of course, living longer than you expected is not a bad thing, but it could spell trouble for your retirement savings. If you live even five years longer than you expected and you're spending, say, $40,000 per year, that's $200,000 in savings you won't have planned for.
Nobody wants to run out of money later in life, but it can be tough to plan for how many years you'll spend in retirement. After all, it's impossible to predict exactly how long you'll live, so estimating your life expectancy can be challenging. However, there are a few things you can do to prepare as much as possible.
Estimating your retirement lifespan
When considering how long you can expect to spend in retirement, look at your family history as well as your own health. If most of your relatives have lived into their 90s, for example, there's a good chance you may live a long life as well. But if the average life expectancy within your family is on the shorter side, you may not need to plan for a very long retirement.
Be honest with yourself, too, as you look into your personal health. If you're battling health issues or are at high risk for certain diseases or illnesses, you may not live to be 100 years old. But if you're in tip-top shape, you could end up living longer than you think.
Besides saving more in your retirement fund, there's one other way to help prepare for a longer retirement: Delay claiming Social Security benefits. By waiting to claim until after your full retirement age (which is either age 66, 67, or somewhere in between, depending on the year you were born), you'll receive the full benefit amount you're entitled to along with a bonus of up to 32% over those who begin benefits at age 62.
Because your benefit amount is generally locked in once you begin claiming, you can collect those bigger checks for the rest of your life. If you end up living longer than you'd anticipated and your savings run dry, those bigger checks can go a long way toward your enjoying your later years comfortably.
Life expectancy can be difficult to estimate, but it's an integral aspect of planning for retirement. By preparing the best you can, your savings will have a much better chance of lasting throughout your senior years.