Dec. 2, 2020, 1:59 p.m. EST

This is one of the most important and difficult calculations in retirement planning

Assumptions about life expectancy can make a dramatic difference in retirement strategies

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By Liz Weston

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How financial planners estimate life expectancy

Many financial planners, whose clients tend to have higher incomes, use age 90 or 95 as default life expectancies, Morningstar research has found. Certified financial planner Malcolm Ethridge of Rockville, Maryland, uses age 99. He acknowledges that few of his clients are likely to reach that age, but he prefers to err on the conservative side.

Related: Where you live may affect how many years you have left

CFP and physician Carolyn McClanahan of Jacksonville, Florida, takes a different approach that factors in the client’s financial resources, health and family history. If a client’s funds are projected to run out in their mid-80s and they’re in good health or have long-lived relatives, for example, McClanahan will help them work out a Plan B.

“We discuss potential ways to reduce spending in the future or the possibility of tapping home equity at some point,” McClanahan says.

Morningstar’s Blanchett suggests another option: Create a personalized estimate using a life expectancy calculator that at least factors in gender, smoking status, income and health, then add a few years to create a cushion. Based on his research, he suggests adding five years to the personalized life expectancy estimate for a single person. For married couples, he recommends adding eight years to the longer of the two life expectancies.

Read next: Want to retire rich? Start by unlearning some conventional wisdom

We can’t know for sure when retirement will end — only that it will. A reasonable estimate of when helps us know how much to save and spend in the meantime.

More from NerdWallet:

Liz Weston is a writer at NerdWallet. Email: Twitter: @lizweston.

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