Retirement Could Last 20+ Years: New Life Expectancy Data Suggests You'll Need More Savings

When planning for retirement, it's helpful to better understand how long your savings need to last. Current life expectancy data reveals that many retirees could spend over two decades in retirement, putting even more importance on financial preparation. 

The Centers for Disease Control and Prevention reports that the average life expectancy in the U.S. is about 77.5 years as of their most recent mortality report in 2022. However, averages can be misleading. 

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Life expectancy jumps significantly for those who reach age 65. Women aged 65 are expected to live to 86.9 years, while men of the same age are likely to reach 84.3 years, according to the Social Security Administration's life expectancy calculator. 

Retirement could last more than 20 years, depending on when you stop working. Someone retiring at 62 – the current average retirement age – may need savings to last over two decades, especially if they plan to maintain the same lifestyle they had before retirement. 

Social Security is a critical income source for many retirees, but it frequently falls short when covering basic expenses. As of November 2024, the average monthly retirement benefit was $1,876.95, according to the SSA. That amounts to about $22,523 annually. For many, that isn't enough to cover living expenses, let alone unexpected emergencies that may occur. 

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Mark Hebner, president of Index Fund Advisors, said, "One of the big issues with Social Security is that it only provides a similar standard of living for those in the lowest quartile of income earners in the U.S. … most people will need to rely on some sort of personal savings in order to maintain their current standard of living in retirement."

So, how much does one person need for retirement? With life expectancy rising, retirement can be difficult to plan for. Fidelity advises assuming that you'll spend 80% of your preretirement income each year of retirement. This varies depending on the lifestyle you want and health care costs. 

Beau Zhao, director of Financial Solutions at Fidelity, says, "Let's say you plan to travel around the world after you retire. You may want to increase the 80% guideline to 90% or 100%.”

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Regarding your retirement goals, saving early – and consistently – can make the difference in saving enough for a long, comfortable retirement. Fidelity suggests saving 10 times your annual preretirement income by age 67 to help ensure financial stability. This target is based on contributing 15% of income annually, beginning at age 25, with investments weighted toward stocks to support growth over time.

If you're behind on savings, it's important to act now. Fidelity suggests setting age-based milestones, such as saving 1x your salary by 30, 3x by 40, 6x by 50 and 8x by 60. These benchmarks can help you assess your progress and adjust your strategy.

Diversification is an important aspect of managing risk and supporting the long-term growth of your financial assets. Financial advisor Daniel Schutte notes that while bonds may seem safer, they often fail to keep up with inflation over time.

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Craig Israelsen, Ph.D., designer of the 7Twelve Portfolio, says, "A broadly diversified retirement portfolio consisting of 40% large-cap U.S. stocks, 25% small-cap U.S. stocks, 25% U.S. bonds and 10% cash has had a 98% success rate in lasting at least 35 years during retirement before running out of money."

Another consideration is health care. Nearly 70% of individuals aged 65 and older will need long-term care at some point, according to the U.S. Department of Health and Human Services. Genworth reports that assisted living costs averaged $5,350 per month in 2023, so having a plan for these expenses – such as long-term care insurance – is crucial.

Retirement planning can feel daunting, but the key is to start or continue saving, no matter your current stage of life. Whether contributing to a 401(k), opening an IRA or building a diversified portfolio, every step brings you closer to securing your financial future. With life expectancy on the rise, preparing for a 20+ year retirement is more important than ever.

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