How Long Will You Live: An Important Input into Retirement Planning
As you enter retirement, there are several unknowns that can affect your financial Security. For example, the rate of inflation can vary year-to-year and affect your expenses. Your investment returns on your savings balance, which can affect your available funds can vary with a volatile stock market. However, among the top three most important unknowns is lifespan. The question comes down to how long your saving must last to cover your retirement years.
Obviously, you would desire a long life and it probably seems a bit morbid to be discussing this topic. On the other hand, retirement financial planning must take into account this most important of variables. You need to be able to estimate your “planning time horizon.”
The question is “how do you figure this out?” In this post, I am going to explore two ways that will help you get an estimate of your lifespan. These two approaches are:
– Life expectancy tables that look at the averages.
– Estimation of your lifespan given your lifestyle, demographics, health-related practices, and genetics.
What Do the Life Expectancy Tables Tell Us
First, what is a life expectancy table? Very simply, it is a statistical tabulation that gives you information about the averages. For example (in the context of the lifespan discussion), for people who have attained the age of 62, on average how many additional years will they live. The Social Security Administration has very good and current information about this. So using the tables that they have produced, I learned the following:
Retire at Age 62:
Males will live an additional 19.7 years, to an average age of 82
Females will live an additional 22.6 years, to an average age of 85
Retire at Age 66:
Males will live an additional 16.8 years, to an average age of 83
Females will live an additional 19.4 years, to an average age of 85
Retire at Age 70:
Males will live an additional 14.0 years, to an average age of 84
Females will live an additional 16.3 years, to an average age of 86
Source: Social Security Administration.
This is very useful information because it tells you what to expect on average. However, it is very general in nature. Averages are just that. Some people expire at a younger age, but some live significantly longer. Use this important input into retirement financial planning as the number applies to your anticipated age of retirement. You can hedge your bets by increasing this estimate by some factor. For example, add five years to the average or increase it by some percentage such as 10%. Of course, this is a guess, but it can provide a guideline that you can use. At least you will have a ballpark estimate of how long your savings must last.
How Do You Get an Estimate More Specific To Your Situation
Average are good for a general guidelines, but what if you want a lifespan estimate more specific to your demographics, lifestyle and family history. For example, we know that non-smokers tend to live longer than smokers. People who exercise are healthier and hence live longer. The longevity of your parents and grandparent is correlated with what you can expect your lifespan to be.
If you want this finer level of prediction for your retirement planning, there is a very useful website by Dr. Thomas Perl that can provide this. Using research on the factors that determine lifespan, he has developed a questionnaire that can provide you with a more pinpointed answer. Go to his website at:
Complete the online questionnaire. This questionnaire probes into a series of factors such as demographics, health practices. Lifestyle, life stresses, and family history. After completing this battery of questions, he will e-mail you your expected lifespan given your responses. This is a much more targeted way to estimate your lifespan and will provide a better estimate that you can use in determining how long you retirement savings must last. Also, it may help you determine if you will need to adjust your expenses or income to cover a greater period of time in retirement.
Retirement financial planning is designed to provide you guidance with what you will need to be solvent in retirement. The big unknowns, such as inflation, investment returns, and lifespan can create considerable uncertainty. Use these resources to help you reduce this uncertainty in regards to your expected lifespan. However, even with the science provided by Dr. Perl and the Social Security tables, lifespan can still be uncertain. Despite the fact that these sources may predict a long life for you, you could still be hit by a bus tomorrow.
Journey Into Retirement 
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