In the most recent issue of Money magazine is an article, “Why Do I Need My Savings to Last to Age 100 if my Average Life Span is much Shorter?”
The article discussed what is the appropriate life expectancy in determining your target nest egg. The number that you select will greatly impact your target nest egg. For example, using our calculator, a 55 year old with $2000 per month in Social Security at a retirement age of 66, no pension, and expected annual living expenses during retirement of $50000, would have the following target nest eggs at different life expectancies: $548k (80 years), $696k (85 years), $824k(90 years), $935k (95 years), and $1032k(100 years). In this example, the target nest egg is nearly doubled from that of age 80 for a life expectancy of 100.
The article mentions that some financial firms use 92, some use 95, and other use 100. Northwestern Mutual even has one that “calculates your life expectancy based on your health, behavior, and family history.” The bottom line – no one knows. We believe that a reasonable life expectancy to use in our retirement plan calculators is 95. It is long, and an age that most of us will not see, but not too long as to be unreasonable. Better to be somewhat safe than really sorry!