You don’t need to plan to live until age 90 when preparing for retirement.
Many retirees default to planning for a life expectancy of 90 years old, but that number is often too conservative. It’s like shooting a free throw with your eyes closed – you might get close, but it’s not a winning strategy. Let’s dive into a better, more personalized way to plan for retirement.
Why Planning for Age 90 Is Flawed
Inaccurate Assumptions:
Most people won’t live to 90.
Men and women have different average life expectancies (82 for men, 86 for women).
Health, habits, and family history all play a role in your personal life expectancy.
Too Conservative:
Planning for 90 may cause you to spend less than you could in retirement.
It could also force you to work longer or save more than necessary, keeping you from enjoying early retirement.
It’s Not Personalized:
Factors like your weight, smoking status, stress levels, and health conditions all impact life expectancy.
Using 90 as a blanket number doesn’t reflect your unique situation.
Wrong Investment Strategies:
Depending on your assumed length of retirement differing investment options could be recommended incorrectly.
Longer life expectancies push you towards growth type investments and delaying social security. When that might not be the case if you have an more accurate number.
A Smarter Way to Plan
Here’s the better method I recommend to clients:
Use Life Expectancy Calculators - Do not enter your contact information.
Take 3 different life expectancy tests to get a personalized estimate.
Suggested tools:
Sun Life Life Expectancy Calculator
https://www.sunlife.ca/en/tools-and-resources/tools-and-calculators/life-expectancy-calculator/
Blueprint Income Life Expectancy Calculator https://www.blueprintincome.com/tools/life-expectancy-calculator-how-long-will-i-live/
John Hancock Life Expectancy Calculator https://www.johnhancock.com/life-insurance/life-expectancy-calculator.html
These tools account for gender, health, and lifestyle to provide a more accurate result.
Average the Results
Average the results and use that number as your planning target.
For a couple use the longer of the two estimates.
If you are using a planning software you can add the numbers in separately for a more accurate plan.
Update Every 3–5 Years
As your health or lifestyle changes, retake the tests.
Adjust your plan to reflect any changes in your life expectancy.
What If You Live Longer?
It’s possible you’ll outlive your initial estimate, but that doesn’t mean you’ll run out of money. By reviewing and adjusting your plan every few years, you can account for any changes in your health or lifestyle.
For example, if your initial target was 85 but you reach 82 in good health, your new plan will extend to say 89. This way, you’ll always have a plan that matches your circumstances.
Benefits of Planning with Realistic Numbers
More Freedom to Spend Early in Retirement:
Many retirees prefer to spend more in the early years when they’re healthy and active.
Knowing your realistic life expectancy lets you enjoy those years fully without guilt.
Tailored Investment Choices:
If your retirement is 20–25 years instead of 30, you may not need as many growth investments.
A shorter retirement horizon means less risk from inflation.
Better Social Security and Pension Decisions:
If your life expectancy is 80, you might take Social Security earlier for better cash flow. Compared to almost always delaying to 70 if your estimate age is 82+.
Pension decisions also depend on life expectancy. If your spouse has a much longer horizon than you, joint life payouts may make sense.
Roth Conversions Become Less Critical:
With a shorter retirement, Roth conversions may not be necessary.
If you only expect 10 years of required minimum distributions (RMDs), the tax impact will be smaller.
Real-Life Example
One of my clients didn’t think he would live beyond 80 due to family health history. However, after taking three life expectancy tests, his average result came out to 87 years. He was happily surprised and realized his savings needed to last longer. We adjusted his spending plan to match his new life expectancy, ensuring he had enough for the long haul.
Quick Recap
Don’t plan to live to 90 unless it makes sense for your personal situation.
Use multiple calculators to get a personalized life expectancy estimate.
Update your plan every few years to stay on track.
Planning accurately allows you to spend more early in retirement while still ensuring you won’t run out of money.
Final Thought
With a personalized life expectancy estimate, you can find the perfect balance between enjoying your money now and making sure it lasts.
Have questions or need help figuring out your life expectancy? Let’s connect and build a plan that’s tailored to you.
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