Have you ever been curious about your life span? Longevity is a topic that arises as we plan for our retirement. Will our resources cover us as we age? How do we plan for the unknown? Bloomberg posted an article yesterday that piqued my interest. Here is a recap of this article.
“Americans increasingly need an accurate sense of how long they’ll be alive. Employer shifts from traditional pensions—which sent a regular check for life—to individual 401(k) accounts mean workers must figure out retirement on their own. When you die becomes a crucial variable, helping to determine how much you need to save and how much you can afford to spend: Die at 95 and your retirement could be twice as expensive than if you die at 80. Information on mortality also helps set the price of annuities, insurance contracts that can pay buyers a set amount of money for the rest of their lives.
Estimating longevity is as much an art as a science. The simplest way to calculate life expectancy is to look simply at how many people are dying at every age. If you want to know a 25-year-old’s chances of hitting age 100, do you just calculate statistical chances of getting through the next 75 birthdays unscathed? Looking at current data, what are the chances of dying at 25, 26, 27, 28, and so on?
“Year-over-year changes in mortality are very volatile,” said Dale Hall, managing director of research at the Society of Actuaries. Over time, death rates jump up and down a lot: All it takes is a bad flu season or the onset of a novel disease to make for a bad year, while new drug treatments for heart disease can produce several excellent years.
Actuaries assume that eventually, longevity improvements will get back on their long-term track. Still, the bottom line is that longevity’s rise has slowed way down. When they reach the traditional retirement age of 65, the average millennial should get just a few more years than the average baby boomer.
The latest, best guesses for U.S. lifespans come from a study (PDF) released this month by the Society of Actuaries: The average 65-year-old American man should die a few months short of his 86th birthday, while the average 65-year-old woman gets an additional two years, barely missing age 88.”
If you are curious, the Actuaries Longevity Illustrator is a tool you may use! Developed by the American Academy of Actuaries and the Society of Actuaries, the Longevity Illustrator is designed to provide you with perspectives on your longevity risk—the uncertainty of how long you and your spouse/partner might live. It does not address your finances, your investments, your earning potential or your anticipated expenses; consult with a financial professional about those aspects of your retirement planning. To test it out, here is the link: Actuaries Longevity Illustrator.
Live long and prosper!
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