Americans are underestimating how long they can expect to live, potentially leaving themselves vulnerable to outliving their savings and having to endure a less-than-comfortable retirement.
A new discussion paper from the American Academy of Actuaries (AAA) found many people fail to even entertain the possibility of living to an advanced age.
The paper, “Risky Business: Living Longer Without Income for Life” was developed by the AAA ‘Lifetime Income Risk Joint Task Force,’ which is indicative of the level of concern regarding the trend.
Increased lifespans are by far the largest contributing factor to running out of funds in retirement. They are also, when compared to other causes such as market volatility, the easiest to protect against simply by purchasing a guaranteed lifetime income product such as an annuity.
The paper found that lifespans on average are six years longer than they were when Social Security was first enacted. The paper does not simply place the onus on the individual but rather proposes myriad of options to quell the disturbing trend.
The paper suggests:
- the modification of rules for required minimum distribution retirement plans
- increasing Social Security’s maximum for delayed retirement credit
- encouraging the use of lifetime income solutions while ensuring tax incentives are in place
- education initiatives
- communication programs