Recent research has revealed that people are increasingly underestimating how long they will live, resulting in a financial shortfall in later life.
According to a report by the Institute of Fiscal Studies (IFS), men interviewed at age 65 felt that 65% chance of reaching 75 – this can be compared to the official estimate of 83%.
This misjudgment can have a significant impact on retirement funds, as people are failing to prepare themselves financially. The IFS state that those who are more pessimistic about their life expectancy may save less throughout their working life and spend more excessively upon retirement.
However, whilst many are underestimating how long they will live, the research also showed that those in the older age groups tend to overestimate their life expectancy, without those in their 70s and 80s being the most optimistic.
Commenting on the findings of the research was David Sturrock, research economist at the IFS. He said: ‘As individuals are given more responsibility for saving for their retirement, and more freedom over how they use those savings in their later years, it is a particular concern that may are systematically misjudging their longevity.
‘When people underestimate their chances of surviving through their 50s, 60s and 70s, they may save less and spend more than is appropriate given their actual survival chances.
‘In contrast, people who overestimate their survival chances may show an undue reluctance to spend their remaining wealth near the end of life.’
