A lack of understanding about longevity could hinder retirement planning and saving, including a move into senior living, according to a new report.
The report from the TIAA Institute and the Global Financial Literacy Excellence Center at the George Washington University School of Business found a clear connection between “longevity literacy” and how prepared individuals are for retirement.
The report builds on data from the 2023 Personal Finance Index survey from January and first introduced the concept of longevity literacy.
Both reports found that less than 40% of adults correctly identified the average lifespan at retirement age.
The new survey provides a more complete assessment of longevity literacy by asking respondents to identify the likelihood among those aged 65 years of living to age 90 and the likelihood of their dying by age 70.
The report called the findings “sobering,” with only 12% of respondents demonstrating strong longevity literacy — that is, they understand how long 65 year olds live, on average, as well as the likelihood of their living to an advanced age and the likelihood of their dying relatively early.
Comparatively, 31% showed weak longevity literacy, or a complete lack of understanding of the distribution of life expectancy at age 65..
In both reports, men were 10 percentage points more likely to underestimate average life span at retirement age. Men also more often demonstrated weak longevity literacy (32%), compared with 29% of women.
“Longevity literacy is particularly important, since retirement income security inherently involves planning, saving and preparing for a period that is uncertain in length,” said Surya Kolluri, TIAA Institute head. “Our research clearly demonstrates a lack of longevity literacy among the vast majority of US adults. Improving this can promote better retirement security and mitigate longevity risk.”
The research, according to TIAA also confirms the link between strong longevity literacy and overall retirement readiness.
Workers with strong longevity literacy tended to be more confident that they would have enough money to live comfortably in retirement (69%) compared with 53% of workers with weak longevity literacy. Those with strong longevity literacy also were more likely to know how much money they needed to save for retirement (50%) and actively saved for retirement (72%) compared with those with weak literacy (32% and 58%, respectively).
Similarly, retirees with strong longevity literacy were more likely to report that their current lifestyle met or exceeded their preretirement expectations (77%) and that they were confident that they had enough money to live comfortably in retirement (82%), compared with those with weak literacy (62% and 69%, respectively).
“Unfortunately, poor longevity literacy cannot be improved by simply providing people with information. Terminology is an obstacle,” said Annamaria Lusardi, the GFLEC’s academic director.
Only one third of adults understand the practical implications of the term “life expectancy,” Lusardi said, whereas one fourth think it means the age by which the vast majority of a group of people will die.
“So simply providing information is not enough; we have to do more to teach about these important concepts,” she said.