In retirement needs analysis, what effect does increasing life expectancy have on capital needs?

Increasing life expectancy significantly affects capital needs because individuals will require a greater amount of savings to sustain themselves throughout a longer retirement period. As people live longer, they need to account for additional expenses such as healthcare, housing, and everyday living costs over many more years than previously anticipated.

This means that, in order to maintain their standard of living, retirees must withdraw funds from their retirement savings for a more extended timeframe. Consequently, the overall capital that needs to be accumulated before retirement must be higher to ensure financial security. This adjustment in financial strategy becomes crucial, as it influences how much individuals should save and invest during their working years to prepare for the financial demands of an increasingly lengthy retirement phase.

Thus, the correct answer acknowledges the reality that a longer life requires a more substantial financial foundation to cover the extended duration of retirement.