How is "life expectancy" significant in retirement planning?

Life expectancy is a crucial factor in retirement planning as it directly influences how long a person's retirement savings will need to last. When planning for retirement, individuals must consider how many years they expect to live after they stop working. This estimation affects the amounts they need to save, the types of investments they choose, and how much they can afford to withdraw from their retirement accounts each year without depleting their funds too early.

A longer life expectancy means that retirees need to ensure their savings can support them for an extended period. This often requires more careful budgeting, larger savings contributions during their working years, and a potentially more conservative approach to withdrawing funds in retirement to avoid running out of money.

Understanding life expectancy enables individuals to create a more personalized and realistic plan for managing their retirement resources, leading to better financial stability and peace of mind during their retirement years.