Retirees are underestimating how long they will live

Published

2 years ago

July 3, 2023

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A significant share of older Americans underestimate how long their retirement is going to last: i.e., how long they are going to live.

Most people know that the average American lives to an age between 75 and 80. Less well known, apparently, is that life expectancy rises with age. At age 60, an American man can expect to reach 82; a woman, 85.

That knowledge is called longevity literacy, and many of us don’t have it. In a 2022 survey by the insurer TIAA, one-quarter of Americans underestimated the life expectancy of a 60-year-old. Another 28 percent said they didn’t know it.

Even among baby boomers, the youngest of whom are nearing 60, more than two-fifths of survey respondents either guessed low on longevity or punted on the question.

“We were kind of shocked to get the data,” said Surya Kolluri, the head of TIAA Institute, which produced the report.

Kolluri said he was particularly dismayed over the large share of respondents who could not answer the longevity question, which was multiple choice.

“We gave them the answer and they still said, ‘Eh, I don’t know,’” he said.

Confusion over human lifespan complicates the business of planning for retirement, a phase of life for which many Americans are already underprepared.

More than two-fifths of baby boomers have no retirement savings, even as the postwar generation enters retirement years, census data show.

The median boomer household held $134,000 in retirement savings in 2019, according to a NerdWallet analysis.

By most accounts, even that figure is not nearly enough. Human longevity doesn’t stop rising at 60. An American who retires at 65 can expect to live to 85, according to Social Security projections.

“We don’t know why people are so off in their expectations,” said Gal Wettstein, a senior research economist at Boston College. “I think there is some evidence that people don’t account for the fact that they’ve already lived to a certain age when they try to guess how long they might live.”

The biggest financial risk facing retirees is “outliving your savings,” Wettstein said, citing research from the school’s Center for Retirement Research.

That fact, too, is lost on many Americans. People approaching retirement wrongly assume that stock market volatility is their biggest financial peril, Wettstein said. In fact, the far greater risk is “living so long that your money runs out.”

Increasing lifespans ranks as one of the great human advances of the past century. An American born in 1900 could expect to reach 47. By 1950, life expectancy had risen to 68. U.S. lifespan peaked at 79 in 2019, then dropped during the COVID-19 pandemic.

The longevity bonus has become more pronounced over time, as we outlive various perils that killed our forebears. A Stanford researcher examined people who live past 65 in developed countries and found that human lifespans increase by three years with every generation.

But such nuances are lost on many people outside the scholarly community.

Researchers at the Employee Benefit Research Institute have repeatedly surveyed Americans of all ages about longevity and found consistent befuddlement.

“One of the consistent things is that there were 20 percent of people who don’t know, who couldn’t give an answer,” said Craig Copeland, director of wealth benefits research at the institute. “So, you’re starting out with one-fifth of people with no idea of how long they were going to live.”

Retirees fared somewhat better on survey questions about longevity. In 2022, Copeland said, more than half of retired persons demonstrated knowledge that an American at 65 can expect to live 20 more years. Even in this group, however, one-fifth of respondents didn’t answer the question.

Boston College researchers have found that many working-age Americans are “pessimistic about how long they are going to live,” and underestimate their own expected longevity, Wettstein said.

Even people in their 50s and 60s “tend to think they’re not going to live very long, or not as long as the life expectancy of a person their age,” he said. “Where that kind of flips is in people’s 70s, which is late for making decisions about retirement.”

Women show much greater longevity literacy than men. In the TIAA survey, 43 percent of women answered the lifespan question correctly, compared to 32 percent of men.

“That concerns me,” Kolluri said of the male respondents, “because what it implies to me is that they’re incurring longevity risk, that they will outlive their money.”

People with greater literacy about human lifespans are more likely to save for retirement, Kolluri said. They are also more likely to have calculated how much money they will need. And they are more likely to be satisfied in retirement.

Lack of longevity literacy leaves many Americans unprepared to finance retirement. There are other factors.

Millions of Americans count on Social Security to see them through retirement. But monthly Social Security checks to retired workers average around $1,800, much less than the typical family spends in retirement.

Prior generations of retirees tapped employer-funded pensions. That income source has gradually given way to employer-sponsored retirement plans.

Yet, according to an AARP analysis, nearly half of Americans have no access to retirement plans at work, especially at smaller firms with fewer employees.

Workers who do save for retirement often don’t save enough. In the latest Retirement Confidence Survey from the Employee Benefit Research Institute, only 64 percent of workers voiced confidence that they would have enough money to live comfortably through their retirement years.

Another measure, Boston College’s National Retirement Risk Index, finds that roughly half of working-age American households are at risk of being financially unprepared for retirement.

Just as worrisome, perhaps, only about one-third of households are aware that they are unprepared.

Many families overestimate how much money they have on hand for retirement and underestimate how much more they will need. Homeowners often focus too much on the rising value of their home, and too little on how much they owe on the mortgage. Workers with retirement accounts may underestimate how far those funds will go. A $100,000 retirement nest egg translates to only about $600 in monthly retirement income. Too often, researchers say, a household has two wage earners but only one partner actively saving for retirement.

Outliving one’s retirement savings is only the largest among several risks Americans face when entering retirement. Another is covering the costs of long-term care.

More than half of Americans entering retirement today will eventually require “long-term services and supports,” at an average cost of $120,900, according to federal research.

“A semi-private room in a nursing home is about $100,000 a year, and that is a lot of money,” Wettstein said. “No doubt, for a lot of people, that would run through their savings very quickly.” UPS reaches deal that lowers chances of nationwide Teamsters strike Teamsters say strike still on the table at UPS

A recent analysis by the National Council on Aging found that 80 percent of people over 60 lack the financial resources to cover long-term care.

“You have this idea that Medicare will cover some of those costs, whereas in fact Medicare doesn’t generally cover most of those costs,” said Genevieve Waterman, director of economic and financial security at the National Council on Aging.

Worried about financing retirement? The National Council on Aging offers an Age Well Planner, and many investment sites feature retirement income calculators.

UK

What is the car finance scandal – and what could today’s ruling mean for motorists?

Published

2 hours ago

August 1, 2025

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What is the car finance scandal - and what could today's ruling mean for motorists?

The UK’s Supreme Court is set to deliver a landmark ruling today that could have billion-pound consequences for banks and impact millions of motorists.

The essential question that the country’s top court has been asked to answer is this: should customers be fully informed about the commission dealers earn on their purchase?

However, the Supreme Court is only considering one of two cases running in parallel regarding the mis-selling of car finance.

Here is everything you need to know about both cases, and how the ruling this afternoon may (or may not) affect any future compensation scheme.

What is the Supreme Court considering?

The Supreme Court case concerns complaints related to the non-disclosure of commission. This applies to 99% of car finance cases.

When you buy a car on finance, you are effectively loaned the money, which you pay off in monthly instalments. These loans carry interest, organised by the brokers (the people who sell you the finance plan).

These brokers earn money in the form of a commission (which is a percentage of the interest payments).

Last year, the Court of Appeal ruled in favour of three motorists who were not informed that the car dealerships they agreed finance deals with were also being paid 25% commission, which was then added to their bills.

The ruling said it was unlawful for the car dealers to receive a commission from lenders without obtaining the customer’s informed consent to the payment.

However, British lender Close Brothers and South Africa’s FirstRand appealed the decision, landing it in the Supreme Court.

What does the second case involve?

The second case is being driven by the Financial Conduct Authority (FCA) and involves discretionary commission arrangements (DCAs).

Under these arrangements, brokers and dealers increased the amount of interest they earned without telling buyers and received more commission for it. This is said to have incentivised sellers to maximise interest rates.

The FCA banned this practice in 2021. However, a high number of consumers have complained they were overcharged before the ban came into force. The Financial Ombudsman Service (FOS) said in May that they were dealing with 20,000 complaints.

In January 2024, the FCA announced a review into whether motor finance customers had been overcharged because of past use of DCAs. It is using its powers to review historical motor finance commission arrangements across multiple firms – all of whom deny acting inappropriately.

The FCA also said it is looking into a “consumer redress scheme” that means firms would need to offer appropriate compensation to customers affected by the issue.

An estimated 40% of car finance deals are likely to be eligible for compensation over motor finance deals taken out between 2007 and 2021, when the DCAs were banned.

To find out how you can tell if you’ve been mis-sold car finance, read the following explainer from our reporter Megan Harwood-Baynes.

How does the ruling affect potential compensation?

In short, the Supreme Court ruling could impact the scale and reach that a compensation scheme is likely to have.

The FCA said in March that it will consider the court’s decision and if it concludes motor finance customers have lost out from widespread failings by firms, it is “likely [to] consult on an industry-wide redress scheme”.

This would mean affected individuals wouldn’t need to complain, but they would be paid out an amount dictated by the FCA.

However, no matter what the court decides, the FCA could go ahead with a redress scheme.

The regulator said it will confirm if it is proposing a scheme within six weeks of the Supreme Court’s decision.

What impact could this have on lenders?

Analysts at HSBC said last year the controversy could be estimated to cost up to £44bn.

Alongside Close Brothers, firms that could be affected include Barclays, Santander and the UK’s largest motor finance provider Lloyds Banking Group – which organises loans through its Black Horse finance arm.

Lloyds has already set aside £1.2bn to be used for potential compensation.

The potential impact on the lending market and the wider economy could be so great that Chancellor Rachel Reeves is considering intervening to overrule the Supreme Court, according to The Guardian.

Treasury officials have been looking at the potential of passing new legislation alongside the Department for Business and Trade that could slash the potential compensation bill.

The Treasury said in response to the claim that it does not “comment on speculation” but hopes to see a “balanced judgment”.

UK

Full details of Heathrow’s plans for a third runway revealed

Published

2 hours ago

August 1, 2025

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Full details of Heathrow's plans for a third runway revealed

Heathrow Airport has said it can build a third runway for £21bn within the next decade.

Europe’s busiest travel hub has submitted its plans to the government – with opponents raising concerns about carbon emissions, noise pollution and environmental impacts.

The west London airport wants permission to create a 3,500m (11,400ft) runway, but insists it is open to considering a shorter one instead.

In January, Chancellor Rachel Reeves announced that the government supports a “badly needed” expansion to connect the UK to the world and open up new growth opportunities.

But London mayor Sir Sadiq Khan is still against a new runway because of “the severe impact” it will have on the capital’s residents.

Under Heathrow’s proposal, the runway would be constructed to the northwest of its existing location – allowing for an additional 276,000 flights per year.

The airport also wants to create new terminal capacity for 150 million annual passengers – up from 84 million – with plans involving a new terminal complex named T5XW and T5XN.

Terminal 2 would be extended, while Terminal 3 and the old Terminal 1 would be demolished.

The runway would be privately funded, with the total plan costing about £49bn, but some airlines have expressed concern that the airport will hike its passenger charges to pay for the project.

EasyJet chief executive Kenton Jarvis said an expansion would “represent a unique opportunity for easyJet to operate from the airport at scale for the first time and bring with it lower fares for consumers”.

Thomas Woldbye, the airport’s chief executive, said in a statement that “it has never been more important or urgent to expand Heathrow”.

“We are effectively operating at capacity to the detriment of trade and connectivity,” he added.

“With a green light from government and the correct policy support underpinned by a fit-for-purpose, regulatory model, we are ready to mobilise and start investing this year in our supply chain across the country.

“We are uniquely placed to do this for the country. It is time to clear the way for take-off.”

The M25 motorway would need to be moved into a tunnel under the new runway under the airport’s proposal.

London mayor still opposed

Sir Sadiq says City Hall will “carefully scrutinise” the proposals, adding: “I’ll be keeping all options on the table in how we respond.”

Tony Bosworth, climate campaigner at Friends of the Earth, also said that if Sir Keir Starmer wants to be “seen as a climate leader”, then backing Heathrow expansion is “the wrong move”.

Earlier this year, Longford resident Christian Hughes told Sky News that his village and others nearby would be “decimated” if an expansion were to go ahead.

It comes after hotel tycoon Surinder Arora published a rival Heathrow expansion plan, which involves a shorter runway to avoid the need to divert the M25 motorway.

The billionaire’s Arora Group said a 2,800m (9,200ft) runway would result in “reduced risk” and avoid “spiralling cost”.

Transport Secretary Heidi Alexander will consider all plans over the summer so that a review of the Airports National Policy Statement can begin later this year.

It also comes after Sky News reported on a Heathrow Airport-funded group sending leaflets supporting a third runway to thousands of homes across west London.

The group, called Back Heathrow, sent leaflets to people living near the airport, claiming expansion could be the route to a “greener” airport and suggesting it would mean only the “cleanest and quietest aircraft” fly there.

Opponents of the airport’s expansion said the information provided by the group is “incredibly misleading”.

Back Heathrow told Sky News it had “always been open” about the support it receives from the airport. The funding is not disclosed on Back Heathrow’s newsletter or website.

US

‘A BIG DAY FOR AMERICA!!!’ – Trump’s tariffs are back, and will affect dozens of countries

Published

4 hours ago

August 1, 2025

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'A BIG DAY FOR AMERICA!!!' - Trump's tariffs are back, and will affect dozens of countries

It is “Liberation Day” III – the third tariff deadline set by Donald Trump.

From today, countries without bilateral trade agreements face reciprocal tariffs – ranging from 25% to 50% – with a baseline of 15% to 20% for any not making a deal.

He has delayed twice, from April to July and from July to August, but hammered this date home in his trademark caps-on style: “THE AUGUST FIRST DEADLINE STANDS STRONG, AND WILL NOT BE EXTENDED. A BIG DAY FOR AMERICA!!!”

“Will not be extended” for anyone but Mexico, it seems. The country secured a 90-day extension at the last minute, with Mr Trump citing the “complexities” of the border.

By close of business on the eve of deadline, he had a handful of framework deals – some significant – including the UK (10%), the EU, Japan and South Korea (15%), Indonesia and the Philippines (19%), Vietnam (20%).

On the EU agreement, which he struck in Scotland, the president said: “It’s a very powerful deal, it’s a big deal, it’s the biggest of all the deals.”

But what happened to the “90 deals in 90 days” touted by the White House earlier this year?

The short answer is they were replaced by letters of instruction to pay a tariff set by the US.

Amid of flurry of late activity, the US played hardball with major trading partners like Canada.

“For the rest of the world, we’re going to have things done by Friday,” said US Commerce Secretary Howard Lutnick – the “rest of the world” meaning everyone but China.

There is, apparently, the “framework of a deal” between the world’s two largest economies, but talks between Washington and Beijing are continuing.

In terms of wins, he can claim some significant deals and point to his tariffs having generated an impressive $27bn (£20.4bn) in June, not bad for a single month.

But the legality of the approach is under siege – with the US Court of International Trade ruling that the “Liberation Day” tariffs exceeded the president’s authority, with enforcement paused pending appeal.

The deadline has stirred the pot, forcing a handful of deals onto the table. Whether they stick or survive legal scrutiny is far from settled.

But the playbook remains the same – threaten the world with trade chaos, whittle it down, celebrate the wins, and pray no one checks what’s legal.