You're probably going to live longer than you think. Here's why that matters.

You're hardly alone if you worry about running out of money in retirement.

More than half of U.S. workers fear outliving their savings, and these fears could prove well-founded if their planning underestimates how long they are likely to live. No one has a crystal ball, but having a realistic idea of how long you (and your spouse) might live can make your retirement a lot more satisfying. Yet, research shows many Americans are missing the mark. How longevity-literate are you? Here's a pop quiz to find out:

What is the average life expectancy for a 60-year-old man in the US?

A) About 16 more years (age 76), B) About 22 more years (age 82), or C) About 28 more years (age 88)?

What about for a 60-year-old woman?

A) About 19 more years (age 79), B) About 25 more years (age 85), or C) About 31 more years (age 91)?

If your answers to both questions were "B," congratulations! According to the latest TIAA Institute-GFLEC Personal Finance Index (P-Fin) survey, you're among a relative few to get it right.

P-Fin is an annual survey of financial literacy in the U.S. This year, for the first time, the study included questions tied to longevity, and the results were worrisome: Only 37% of Americans answered correctly; 28% didn't know; 25% underestimated life expectancy and 10% overestimated. Gen Z and Gen Y (a.k.a. millennials) were the least longevity-literate age groups, with only 30% and 32%, respectively, answering the questions above correctly.

It's well-known that people who score high on financial literacy tests tend to plan better, save more and feel more confident about retirement. This new research shows that people with strong knowledge of life expectancy are also more likely to plan and save. As with financial literacy, retirees who are more longevity-literate tend to experience more secure retirements.

Longevity literacy is a hot topic right now because so many Americans are living into their 90s. According to the U.S. Census Bureau, the number of Americans 90 or older nearly tripled between 1980 and 2010, and that number is expected to triple again by 2040.¹ According to the Society of Actuaries, at least one member of a 65-year-old, different-sex couple has a 50% chance of living to be 93 years old and a 25% chance of making it to 97.² Of course, when people live longer, their nest eggs need to last longer, too.

The P-Fin study showed that women tend to be more longevity-literate than men. Women are more likely to know life expectancy at age 60 and less likely to underestimate it, which bodes well for their planning. At the same time, one troubling and consistent finding over the P-Fin survey's first six years is that women's financial literacy lags that of men. Separate TIAA research shows that women also save less,³ a byproduct of women having more primary caregiver responsibilities and more gaps in employment as a result. This dual reality—women's greater longevity paired with a lower savings rates and lower financial literacy—may make saving for retirement via an annuity an especially attractive option.

Annuities and longevity literacy

Financial literacy, longevity knowledge, retirement readiness and retirement satisfaction are interconnected. Across every age group, most workers don't know how many years of life expectancy they should build into their planning. Without a reasonable understanding of how long their retirements could last, workers risk saving too little before they retire and spending too quickly after they retire, potentially making their biggest fears a reality. The most recent P-Fin survey highlights the importance of longevity literacy in ensuring that retirees don't outlive their money.

With Americans living longer, retirement savings must be stretched further. TIAA's research demonstrates annuities as investment vehicles are well-matched to today's shifting demographics. When you save via an annuity, the institution manages your money with an eye towards the long-term, and then ensures you have a specific stream of income in retirement. As the name implies, lifetime annuities mitigate longevity risk by providing income as long as you live—even if that is longer than you expected.