Life expectancy is an important topic for retirement planning. To make sure you can live comfortably throughout your entire life, you need to know how long you will need to support yourself. To get an idea of life expectancy, we can consult the information provided by the government. Since we are based in Canada, we will be using information from Statistics Canada for the rest of this post. The information we will be discussing can be found at the Statistics Canada website. Though we are using Canadian statistics, the overall concepts discussed here will apply to people who live elsewhere.
The most commonly given number for life expectancy applies to a person who has just been born. This is the number of years an average newborn will be expected to live. However, this information includes the entire population, including those people who do not make it to retirement age. So for our purposes, it is better to use the life expectancy values for the age that you are planning to retire. Based on the latest information from Statistics Canada, if you plan to retire at age 65, then on average you can expect to live to 84 if you are male and to 87 if you are female. Notice that this is longer than the commonly cited life expectancy from birth, which is 79 for males and 83 for females.
If you plan to retire at a different age, then Statistics Canada also publishes average life expectancy values for all ages at 5-year intervals. Average life expectancy is also broken down by province, income level, education, and other variables if you wish to go into more detail. Another thing to consider is that average life expectancy has been increasing slowly each year. The last decade has seen an increase of nearly 2 years to the life expectancy of the average 65 year old male, and added another 1.5 years to the life expectancy of the average 65 year old female. If you are a few decades away from retirement, this may need to be taken into consideration.
It is important to note that these life expectancy numbers are an average. Around half of the people who are included in this statistic will live longer than the average. About a quarter of the population that reaches age 65 will live until they are about age 90 for males and age 93 for females.1 That is around 6 years or 30% longer that you need to save up for if you are one of those lucky few. As a result, you should include an extra few years in your retirement planning so that you can continue to live comfortably if you live longer than the average.
The exact amount you need to save for retirement will vary from person to person, depending on how much income you need when you retire, any expenses that may occur in retirement, and any additional income you will receive such as pensions. Though ultimately, the average male should save enough for around 25 years of retirement, and the average female should plan for around 28 years of retirement.