The results of the survey from the University of Michigan’s Health and Retirement Study show that people generally underestimated how long they would live. In fact, of the people who guessed that they had a 0 percent chance of living until their 75th birthday, about half of them did. And of those who figured they had a 50-50 shot, 75 percent made it to age 75.
While the extra birthdays certainly came as good news to most, there is a downside: “Individuals do not fully understand the longevity risk they face,” authors Benjamin Harris and Katharine G. Abraham wrote, or, in other words, the risk of outliving retirement savings. Their solution? Have people buy “longevity annuities.”
Here’s how the Wall Street Journal explains it:
“At age 60, you could take $100,000 and buy the annuity. Then at age 75 you would start getting an annual income of about $1,575 a month or $19,000 a year for the rest of your life. If you wait until age 85 to start collecting, the payments are even more substantial, $4,500 a month or $54,000 a year for the rest of your life.”
Live to 100, and you’d be able to afford the cake to fit 100 candles.