How much longer might you live? Think again

Consider this: A 65 year-old woman has a 50/50 chance of living another 20 years to age 85, according to an online calculator maintained by the Society of Actuaries (SOA). Similarly, a 65 year-old man has a 50/50 chance of living another 17 years to age 82.

This information might cause you some confusion if you've read that the average life expectancy in the U.S. is currently 81 for women and 76 for men. But these are life expectancies from birth -- they don't apply to someone who's already reached age 65.

Life expectancies at birth calculate the average lifespan for everybody who was born in the same year, and they include people who die before 65. So, if you make it to 65, you're in a more select group of people who've been healthy enough -- or lucky enough -- to make it that far.

Many people make this common mistake -- confusing life expectancies at birth with remaining life expectancies at your current age, such as 65.

Here's one way to double-check this thinking. Suppose you're a man who's made it to 80. Clearly, you should have some years of life remaining, but if you relied on life expectancies from birth, you should have been dead by now.

Why is this important? This information is critical when it comes to retirement planning. If you're a woman planning how much savings you'll need for retirement, you'll need more money if you live to 85 compared to living to 81 -- an extra four years of necessary retirement income. The same logic applies to a man.

And having an idea about how long you might live should influence your decision about when to start your Social Security benefits.

So, the first mistake some people make when planning their retirement is underestimating how long they might live, which can lead them to underestimate the amount of money they'll need to last the rest of their lives.

The second mistake would be planning to make your savings last just to your average life expectancy. Remember, your life expectancy isn't your destiny. It's just an estimate. You could die well before your average life expectancy -- or well after.

For example, the SOA calculator shows that our 65-year-old woman has a 28 percent chance -- a little more than one out of four -- of living another 25 years to age 90. And she has a 32 percent chance -- almost one out of three -- that she'll live only another 15 years to 80.

Similarly, our 65-year-old man has a 30 percent chance -- nearly one out of three -- of living another 22 years to 87. And he has a 24 percent chance -- almost one out of four -- of living only another 10 years to 75.

This illustrates a significant retirement planning challenge: You don't know how long you'll live, and the range of possible outcomes is large. In these examples, the range of outcomes is 10 years or more around the average life expectancy, although the actual range is much wider when you consider more extreme possibilities such as living a very long time or dying right after after retirement.

The actual range of how long you might need your money to last is also much wider if you consider how long one member of a married couple might live. Understanding this means you'll need to plan for the uncertainty about how long you -- and your spouse or partner, if applicable -- will live.

You can use the SOA calculator to calculate your remaining life expectancy for various ages -- and the odds of dying before your life expectancy or living beyond it. This calculator also works for couples.

This is an important step in retirement planning. As a result, you'll also want to learn as much as you can about the different methods you can use to generate a retirement paycheck that lasts as long as you do, no matter how long you live.

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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.