Longevity: The Most Dangerous Planning Tool

Life and death are not exact sciences. That fact can be particularly problematic for anyone trying to figure out the amount needed to maintain a standard of living after retirement, weighing the need for life insurance or making any of a number of other financial decisions either personally or professionally.


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The average life span of both men and women in the developed world has been slowly and steadily increasing over the last century. The Duluth News Tribune reports that Japan’s Health Labor and Welfare Ministry last week announced that the number of centenarians, people 100 years old or older, is expected to increase by more than 2,500 to a record level of 25,606 by the end of the month. In the U.S. the Associated Press reports there are 10 centenarians in every 100,000 people. This may not sound like many until you realize that the average American born in 1900 lived only 47.3 years, according to the Centers for Disease Control (CDC). Someone born in 1950 would live an average of 68.2 years, and the CDC says children born in 2000 will live an average of 77.0 years. Interestingly, the CDC also reports that individuals who were 65 in 2000 will live another 18.0 years, on average and those who were 75 live an average of another 11.4 years.

Despite the fact that Americans are living longer, a 2004 study by MetLife Mature Market Institute indicates that 48 percent of those age 41-59 have not factored longevity into their retirement planning according to the National Underwriter, Life & Health. Another Metlife study cited by the National Underwriter indicates that 33 percent of those age 59-71 have not calculated the monthly income they will need in retirement.

“Most boomers seem to hail from the Land of Lake Woebegone,” Keith Newcomb, a financial planner and wealth manager with Full Life Financial, LLC, in Nashville, Tennessee told the National Underwriter. “Everyone seems good-looking and strong. They believe they are unique. Even when told about general longevity trends, they don’t believe it will happen to them because they believe they are different from everyone else – special.”

Sheryl Garrett, certified planner and founder of the Garrett Planning Network agrees. She told MarketWatch “If we don’t do something about adjusting our thinking now while we have time to make adjustments in our planning and saving so we have enough, one day we’re going to wake up broke.”

Traditionally, life span or life expectancy calculations have been the realm of insurance companies and actuarial professionals. This is no longer the case. Today, anyone involved in making financial decisions needs to be aware of and understand what life expectancy is and the role it plays in their financial lives.

Fortunately, there are several tools to help individuals calculate their life expectancy. Online calculators like Northwestern Mutual’s Longevity Game and the University of Pennsylvania’s Wharton School Life Calculator are a good place to start. These are not the only online calculators available, however, for planning purposes Stephen Rosen, an actuary and president of the American Society of Pension Professionals and Actuaries tells MarketWatch that the more data requested by the calculator, the more likely the resulting projection will be accurate. Keep in mind that just by the nature of the statistic, which is the average mean, half the people of the same age will live longer than the projection.

“If you use a life-expectancy [calculator], no matter how reflective of your personal situation…half the time you’re going to outlive that number,” Chris Raham, a senior actuarial adviser with Ernst & Young told MarketWatch.

Longevity is not a topic financial planners can avoid. Online calculators can be a way to start the conversation. And rather than ignoring this dangerous projection, include multiple life spans in your plans. Just to be safe.

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