An unrecognized barrier to retirement income security: Poor longevity literacy

27 Pages Posted: 18 Feb 2024

See all articles by Paul Yakoboski

Paul Yakoboski

TIAA Institute

Annamaria Lusardi

Stanford University - Stanford Institute for Economic Policy Research

Andrea Sticha

Stanford Graduate School of Business

Date Written: August 1, 2023

Abstract

Longevity literacy is an understanding of how long people tend to live upon reaching retirement age. It is particularly important since retirement income security requires planning, saving, and preparing for a period that is uncertain in length.

Unfortunately, data from the 2023 TIAA Institute–GFLEC Personal Finance Index (P-Fin Index) demonstrate a lack of longevity literacy among the vast majority of U.S. adults. Using three new questions to measure longevity literacy, this report highlights two major groups in the population:

• Only 12% of U.S. adults have strong longevity literacy—i.e., they demonstrate an understanding of how long 65-year-olds live on average, as well as the likelihood of living to an advanced age versus the likelihood of dying relatively early.
• 31% have weak longevity literacy—i.e., they demonstrate a complete lack of understanding of the distribution of life expectancy at age 65. This is a knowledge gap that can keep them from planning and preparing adequately for retirement.

This matters because longevity literacy is associated with retirement readiness.
• Workers with strong longevity literacy tend to be more confident they will have enough money to live comfortably throughout retirement—69% are very or somewhat confident compared with 53% of workers with weak longevity literacy. They are also more likely to have figured out how much they need to save for retirement (50%); and a larger share actually
saves for retirement on a regular basis (72%) compared to those with weak longevity literacy (32% and 58%, respectively).
• Retirees with strong longevity literacy are more likely to report that their current lifestyle meets or exceeds their preretirement expectations (77%) and are confident they have enough money to live comfortably throughout their retirement years (82%). The analogous figures among retirees with weak longevity literacy are 62% and 69%, respectively.

Keywords: financial literacy, household saving, finance, elderly, retirement

JEL Classification: G53, D14, J14, J32

Suggested Citation

Yakoboski, Paul J. and Lusardi, Annamaria and Sticha, Andrea, An unrecognized barrier to retirement income security: Poor longevity literacy (August 1, 2023). Available at SSRN: https://ssrn.com/abstract=4729215 or http://dx.doi.org/10.2139/ssrn.4729215

Paul J. Yakoboski (Contact Author)

TIAA Institute ( email )

8500 Andrew Carnegie Blvd.
3rd Floor
Charlotte, NC 28262
United States
704-988-4681 (Phone)

HOME PAGE: http://https://www.tiaainstitute.org/

Annamaria Lusardi

Stanford University - Stanford Institute for Economic Policy Research ( email )

366 Galvez Street
John A. and Cynthia Fry Gunn Building
Stanford, CA CA 94305
United States

HOME PAGE: http://siepr.stanford.edu/people/annamaria-lusardi

Andrea Sticha

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, 94305
United States

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