Longevity Planning

For the past twenty years, most financial planners have used Mortality Tables to help them compute the adequacy of asset levels for funding retirement income needs.  These tables were based on the actual life span of general population in the United States.  Those wanting to be more conservative used tables based on those individuals “wealthy” enough to buy life insurance.  Thinking that we were being “belt and suspenders” conservative, we’ve used Annuity Tables, which pushed expected life spans even further.  Each of these tables yields a shorter expected life span than the table shown above.  Rather than 81 or 83, this table pushes Male life expectancy out to 85.  Instead of 84 or 86, it pushes Female life expectancy out to 88.  The numbers really press on out there when you lower the odds to 1 in 4 instead of 1 in 2, and you consider the Joint Life Expectancy of a couple, rather than individuals.  Bottom line:  For each couple reaching age 65 in “healthy” shape, there’s a 25% chance that one of them will live to be 97!  That has profound implications on retirement sufficiency calculations.  It also adds a new twist to the Mark Twain quote, “If I’d known I’d live this long, I’d have taken better care of myself.”  He should have said, “If I’d known I’d live this long, I’d have taken better care of my money.”

There’s a second factor hanging over our heads like the Sword of Damocles – that’s healthcare costs for retirees.  Over their joint lifespan, a couple retiring at age 65 can expect to spend approximately $260,000 on healthcare costs.  These two issues – longer life spans and increasing healthcare costs – cause us great concern and increase our interest in improving our resources for answering the most critical financial question you face, “When can I afford to retire?”


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