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As you progress through your 50s and 60s, you start asking yourself an all-important question: How much longer have I got?
If you’re like most people, you’ll base your answer on an educated hunch. Maybe your family tree features lots of nonagenarians so you assume your great genes will keep you fit into your 90s. Or maybe you’re a fatalist by nature and you’re convinced you won’t make it past 75.
If you’re a life insurance actuary, however, you’ll approach this quandary with hard data. By analyzing risk factors (age, gender, health history, etc.) and crunching numbers, you’ll arrive at a more nuanced (but still fuzzy) answer.
Actuaries have the advantage of using algorithms and mortality tables to calculate one’s odds of dying at a certain age. Uncertainty remains, of course, but the law of large numbers gives actuaries a rough sense of longevity among a pool of people with similar profiles.
Your current age plays an outsize role in estimating your remaining lifespan. The life expectancy for a 65-year-old is about 84 for men and nearly 87 for women.
Yet many freshly retired folks dismiss such probabilities and defer to their gut. They draw conclusions about their likely death date based on a mix of rational analysis and irrational impulse.
“Lots of people underestimate their longevity,” said Mark Kravietz, a certified financial planner in Melville, N.Y. If their parents died at 62 and 60, and they’re 64, they tend to believe that they’re living on borrowed time.
If you’re relatively healthy, you may figure it’s worth asking your primary care physician to estimate how much longer you’ll live. Don’t put much stock in the answer.
“When it comes to predicting how long more-healthy people will live, called life expectancy, doctors don’t even know where to start,” writes Peter Bach, M.D., in a Washington Post column. “This is probably because our profession focuses almost exclusively on diseases.”
Even if you’re diagnosed with a serious illness, a doctor’s ability to forecast your remaining time on earth is iffy at best. Bach notes that physicians’ “prognostications—such as how many months someone will live—are rarely accurate.”
Looking for a more realistic sense of your life expectancy? Start by thinking like an actuary.
There’s a free tool, the Actuaries Longevity Illustrator, developed by the American Academy of Actuaries and the Society of Actuaries. After answering questions about your health, smoking habits and demographic info, it will provide data showing the likelihood that you may live to a certain age.
It doesn’t specify the age you’re going to die (you’d need Johnny Carson’s Carnac the Magnificent for that). But at least you gain insight into how much longer you—and your partner—might expect to live.
For retirement planning purposes, it’s prudent to think in terms of outliving your expected expiration date. The last thing financial advisers want is for their aging clients to run out of money.
“Life expectancy is an average,” said R. Dale Hall, managing director of research at the Society of Actuaries in Schaumburg, Ill. “Many people will live well beyond the average.”
Hall isn’t a fan of the term “life expectancy.” He argues that retirees are better off thinking about what he calls their “life preparancy age”—or the age to which 10% of the over-65 population is expected to live.
“Life expectancy is much more the middle of distribution,” Hall said. “But people might [mistakenly] think that life expectancy is the target within one or two years. Then they can be surprised if they live five or more years beyond their life expectancy.”
Another danger of getting too caught up in life expectancy is it can distort your decision on when to claim Social Security. Pessimists (“I’ll probably die young so I’ll claim early”) can wind up leaving lots of money on the table if they live into their 80s and beyond.
You can get a free 11-page report, “Deciding When to Claim Social Security,” which underscores the importance of marital status and other factors that can affect longevity.
“Whether you’re married or single is a big factor,” Hall said. “Part of survival is being able to access care when you need it. [A partner] can identify better than yourself when you might need care and perhaps provide that care in the household or drive you to see a physician.”
