As life expectancy increases and health care costs continue to rise, CFOs budgeting for future employee benefit costs should be aware of the longevity literacy gap among their workforce.
New data from the TIAA Institute and the Global Financial Literacy Excellence Center found nearly half (43%) of more than 3,500 U.S. adults answered zero questions correctly on a basic longevity quiz. The report also showed that some future retirees are unaware of the workings of investment tools that provide lifetime income, reflecting poor financial literacy that is increasingly common among Americans.
Breaking down the longevity literacy gap
The data points to a widespread misunderstanding of how long retirement may actually last. Just 32% of adults correctly answered how much longer a 65-year-old would live on average, with the likelihood being 84 years old. Nearly a quarter (24%) said “don’t know,” while 35% underestimated and 9% overestimated.
Responses were similar when asked about the odds of living to age 90, with the likelihood being about 30%. Only 32% answered correctly; 28% underestimated, 26% didn’t know, and 14% overestimated. On the likelihood that a 65-year-old does not live past 70 years old (about 5% for men and women), just 26% got it right, while 34% responded “don’t know.”
These blind spots could hinder finance teams responsible for evaluating or promoting retirement offerings. If the people shaping benefits programs don’t fully understand longevity risk, retirement options may be underutilized, underpromoted or misrepresented across the organization. Helping employees plan for longer financial futures may also signal long-term investment in their development, and is something younger workers consistently say they’re looking for in employers.
Older generations, particularly those closer to or already in retirement, performed better on the questions but didn’t express knowledge far beyond their younger peers. Baby boomers and the Silent Generation (children of the Great Depression) answered only about half the questions correctly. Surveyors also broke down the findings by gender and found that, on average, men correctly answered 43% of retirement fluency questions, compared to 38% for women.
All respondents struggled most with questions about Medicare. Under a third (30%) of adults knew that Medicare typically covers about two-thirds of retirement healthcare costs, while only slightly more (32%) knew how long people tend to live after reaching retirement age.
Findings show confidence in retirement planning strongly correlates with fluency. Among those who answered four or five questions correctly, more than a quarter (26%) said they were very confident they would have enough to live comfortably in retirement. Among those who got all of the questions wrong, only 10% expressed that same confidence.
More retirement, more planning
Though they may not be sure how long they’ll live, workers expecting longer retirements are significantly more likely to engage in proactive planning. More than three-quarters (78%) of those expecting 20–29 years in retirement are saving regularly, compared to 47% of those expecting less than 10 years.
That trend extends to more advanced planning. Nearly half (47%) of those expecting a 30+ year retirement have calculated how much they need to save, while only a quarter (25%) of those expecting under 10 years have done so.
Expectations about retirement length also influence interest in lifetime income products, though many workers remain unsure of what these products do. Among those saving for retirement, 23% of workers expect a 30+ year retirement plan to annuitize some savings, compared to 13% of those expecting shorter retirements.
This suggests workers with a better understanding of retirement duration are more inclined to explore products that others may not even know exist.
For CFOs, the findings underscore the risk that a lack of longevity literacy poses to workforce retirement readiness. If employees underestimate how long they’ll live, they may save less, avoid products like annuities and retire too early. This will likely strain both personal finances and employer-sponsored benefit programs. That can impact finance teams by putting long-term pressure on matching contributions, plan design and benefit strategy for their employees and fellow executives alike.
