Employee Benefit Research Institute studies predict an enormous shortfall between the amount of money required for the elderly to afford basic expenses during retirement and the income and benefits they are expected to have (See VanDerhei and Copeland, 2003). VanDerhei and Copeland (2003) show that the elderly face an income shortfall of at least $400 billion between 2020 and 2030 just in their ability to cover basic living expenses and any expense associated with an episode of care in a nursing home or with a home health care provider.

Health care costs may be the most difficult retirement expense to predict. Employee Benefit Research Institute research has found that a single man age 65 in 2008 with access to employment-based health benefits in retirement could expect to need $331,000 to cover health care expenses in retirement while a single woman would need age 65 in 2008 would need $390,000 depending upon how long that person lives, how fast insurance premiums increase and how much health care services the person will need in retirement (See Fronstin, Salisbury, and VanDerhei 2008).

Average life expectancy for a 65-year-old male is 17 years (82 years of age) and for a female it is 20 years (85 years of age). Life expectancy may be a good starting point for financial planning for individuals, but simply using average life expectancy of 82 and 85 without considering other factors could lead to significant shortfalls for many individuals. Not only is longevity a major threat to retirement income security, but individuals also tend to underestimate longevity. The table below shows that 25 percent of 65-year-old males (the 75th percentile) are expected to live to age 89, and 10 percent (the 90th percentile) are expected to live to age 94. Healthy individuals at age 65 are expected to live even longer.

Life Expectancy at Age 65
	GAM94a		NML Bestb
	Males	Females	Males	Females
	(years)
50th percentile	82	86	86	88
75th percentile	89	92	92	94
90th percentile	94	97	93	95
99th percentile	101	104	100	101
Source: EBRI estimates based on data from the Society of Actuaries and Northwestern Mutual Insurance Company.
a Group Annuity Mortality Table of 1994.
b Northwestern Mutual Life Insurance "best risk" for individuals in good health.

An individual's life expectancy varies with a number of factors, such as gender, age, weight, height, education, family medical history, personal medical history, health status, diet, exercise, and general lifestyle. Furthermore, life expectancy is expected to increase in the future with technological innovation in the delivery of health care. Some life expectancy calculators use more detailed information than others in determining age at death. It is recommended that you determine your personal life expectancy using a variety of life expectancy calculators. To help you determine your personal life expectancy, visit Life Expectancy Calculators page.

To get one estimate of how much money you will need in today's dollars to cover insurance premiums and out-of-pocket expenses for health care services in retirement, go to https://powertools.fidelity.com/healthcost/personalInfo.do, to reach Fidelity's calculator for planning health care costs in retirement. However, this is only the first step in the retirement planning process. You will need to do further analysis, either yourself using a more detailed worksheet or computer software, or with the assistance of a financial professional. For additional resources, please visit www.choosetosave.org.