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Life Expectancy

They say that the only certainty in life is death and taxes.  The certainty is death, the variability (risk) is when death will occur.  Someone who saved enough to retire on to survive to their life expectancy of 85 may be fine if they live that long (if the expected investment return is realized).  If they lived longer than 85, their assets could be depleted.  If they lived shorter than 85, they would leave a significant inheritance to their heirs.  So, to be conservative, more financial planners are assuming a longer life expectancy to make sure there are enough assets for their clients to live on.

There are many life expectancy calculators out there that will estimate how long you can be expected to live.  Yet, each will tell you a different answer due to:

  • Number of risk factors (e.g., smoking and other heath factors) that they ask
  • How up to date their data is (e.g., are they using data from 10, 20 or 30 years ago to project your current life expectancy)
  • If they assume an improvement in mortality risks (e.g., assuming better health and longer lives due to finding a cure for cancer or AIDS)
Author's Life Expectancy
CCH Simple calculator that take 2 minutes
Current Life Expectancy Excel spreadsheet for the average person (does not factor in any risk factors or mortality improvements)
Northwestern Longevity Game Shows how your life expectancy is effective as you fill out survey (takes 5 minutes)
Wharton Shows a range of probability of living to certain ages (e.g., I have a 25% chance of dying before 77 and 25% chance of living past age 95)

The issue is unpredictability of how long you may live.  They key is to understand the range of ages that you may live to so that you can plan your retirement savings accordingly.  This is especially true if you are married, because there is a higher probability of at least one of you will live past the age of 90.  That is why you may live for the moment but plan for a long haul.

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