Longevity Literacy: Planning For a Lasting Tomorrow

We all hope to live longer, more meaningful lives. Many of us spend our lives dedicating time and resources to maximize our lifespan with doctor visits, healthy meal planning, and regular exercise. While we hope a longer life comes with the joys of spending more time with family and friends, it also means preparing financially for the possibilities. One of?the biggest fears for retirees is outliving their?retirement savings. It’s impossible to know just how long you will live, so how can we feel confident in our retirement finances given such uncertainty? The answer, as a study from the TIAA Institute underscores: planning grounded in longevity literacy.

So, What is Longevity Literacy??

Longevity literacy is an understanding of how long people tend to live in retirement. It’s not just how long retirees live on average, but how often they live to advanced ages. Today, life expectancy is 84 years for men and 87 years for women. Additionally, 30% of 65-year-old men and 40% of women live to age 90 or beyond. It is crucial to recognize and account for this uncertainty (i.e., what is referred to as longevity risk) in preparing for your hard-earned retirement.

Longevity literacy enables us to be smart in our approach to saving money for retirement and then using that money in retirement, so we can enjoy a high quality of life throughout. Individuals with strong longevity literacy are more inclined to plan and save for retirement while still working, and subsequently tend to experience better financial outcomes in retirement. Though these efforts are often more challenging for underserved communities because of systemic issues, some of these challenges can be addressed through education.?

The Value of Annuities in Longevity Planning

Annuities can play a crucial role in helping ensure financially secure retirements and a happier and more secure future. With a fixed annuity, you may elect to trade in a portion of your retirement savings for monthly checks you’ll receive for the rest of your life. This guarantees* a steady income stream, alleviating the fear of outliving your savings.

Not only is annuitization of a fixed annuity valuable in longevity planning, but it can also reduce the risks associated with market unpredictability and fluctuating interest rates that can impact other forms of retirement income. Fixed annuities can provide you with a predictable and secure income, ensuring that when you retire, you can maintain your standard of living and meet essential expenses regardless of economic conditions. They can be tailored to your individual needs, offering options for inflation protection, spousal benefits, and legacy planning. This flexibility allows you to customize your annuity contracts to suit your personal circumstances and financial goals best.?

Let's Talk: Your Strategies for Long-Term Financial Planning

I believe that adequately saving, planning for lifetime income, and seeking professional advice are all essential in long-term financial planning. Your hard-earned dollars cannot go to waste. here are a few ways you can help ensure more money stays in your pocket:?

• Diversify your investments: Diversification is a key aspect of a robust retirement strategy. Spreading your savings over various asset classes can reduce risk while allowing for growth. Additionally, ensuring you are receiving the maximum employer match and contributing even more is crucial. These steps will help you build a strong retirement strategy that meets your needs, maximizes tax benefits today, and can help ensure future financial stability.?
• Invest Timely: The longer a retiree lives, the more savings are needed to fund that retirement. We need to embrace a new narrative where young people start contributing to their retirement savings early and have access to information that truly resonates with them. Are we talking about compounding enough? Even small, regular contributions have the potential to grow significantly over time and to help provide a secure retirement fund. Starting early and making consistent contributions is key to building a strong financial foundation for the future.??
• Plan for the expected and unexpected: Inflation is real. As the prices of groceries, healthcare, mortgage interest rates, and other essentials rise, our buying power shrinks. Incorporating these projections in your retirement planning will help you maintain your standard of living over time. Market ups and downs are inevitable – that’s all a part of the investment journey. The key is to remain focused on your long-term goals and not make hasty decisions based on short-term market movements. As mentioned earlier, diversifying your investments helps mitigate risks associated with market volatility. You should regularly review and adjust your portfolio to ensure it aligns with your risk tolerance and retirement goals.

Understanding life expectancy at retirement and the likelihood of living to advanced ages is important in planning for a financially secure retirement. In the past, defined benefit plans were a staple of the retirement journey, as these pensions and Social Security provided a guaranteed income. Today, with fewer defined benefit plans and rapid societal transformation, we need to take a more active role in our retirement planning.?

Seek Professional Advice

Now that you’re ready to take a more active role in your retirement planning, know that you don’t have to navigate the complexities alone. Professional advice can guide you through investment decisions, tax strategies, and income planning, and help you navigate the complexities of longevity risk. Seeking additional information from financial advisors who can curate a plan specifically tailored to your experience and unique needs will prepare you for a healthy financial future.

Health and Wellness Considerations

As the saying goes, "health is wealth," but what does having good health have to do with retirement planning? Maintaining good health can result in reduced medical expenses while increasing life expectancy. That’s great news – but it also means that greater longevity requires additional financial resources. As we age, healthcare costs inevitably rise and may ultimately become one of our biggest expenses in retirement. From routine check-ups to unexpected medical emergencies, the costs add up, so planning for these expenses is crucial. There are limits and coverage gaps across various health insurance plans, so investing in supplemental policies and long-term care insurance increases the probability that you’ll be financially secure as you age.

When we think about retirement, many may see it as a distant reality. But preparing for a longer life sooner brings confidence about financial security. It’s time to shift the way we talk about longevity risk and literacy. It’s not just about how much you have saved up for your retirement. It’s also about shifting your mindset and having the courage to start today. At TIAA, we have the tools to help you navigate the complexities of retirement planning and longevity.

*Any guarantees are backed by the claims-paying ability of the issuing company. Guarantees of fixed monthly payments are only associated with fixed annuities

Investment products may be subject to market and other risk factors. See the applicable product literature or visit TIAA.org for details.

This material is prepared by and represents the views of the author and does not necessarily represent the views of TIAA, its affiliates, or other TIAA staff. These views are presented for informational purposes only and may change in response to changing economic and market conditions. Investment decisions should be made based on an investor's objectives and circumstances and in consultation with his or her advisors. Certain products and services may not be available to all entities or persons.?

This material is for informational or educational purposes only and is not fiduciary investment advice, or a securities, investment strategy, or insurance product recommendation. This material does not consider an individual’s own objectives or circumstances which should be the basis of any investment decision.

Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, are not deposits, are not insured by any federal government agency, are not a condition to any banking service or activity, and may lose value.

?2024?Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, New York, NY