Life Expectancy and Retirement

Jul 2011

Here’s one important lesson:  Lengthening life expectancies are a fact of modern life.  Within the last month I completed one of those online life expectancy calculators, which included questions regarding my age (62), sex, height, weight, diet, health, etc.  According to the calculator, my life expectancy is another 24 – 26 years (age 86 – 88).  That’s not a remarkable figure, given that I have already survived the first 62 years of my life and remain in good health.  Interestingly, the online calculator did not ask how long my parents or grandparents lived.  My mother is 90 and still alive, my father passed away two weeks short of his 89th birthday, and my grand­parents lived well into their 90s.  So perhaps my life expectancy is a bit longer.  Between my wife and me, the odds that at least one of us will reach age 90 are better than 50 – 50.  Using 90 as a conservative joint life expectancy, this means that fully half of all couples in similar situations will see at least one spouse live longer than 90 years.  But who wants to plan on living only up to his life expectancy?  After all, fully 50% of people will live longer.  To be conservative, shouldn’t couples plan on living, say, five years longer than their joint life expectancy?  In our case, that gets my wife and me planning for one of us to live to about 95.  That is over 30 years from now, and it necessarily affects our determination of appropriate investments.  For example, using data going back to 1926 (when detailed financial information became available), there has never been a 30-year period in which bonds performed better than stocks.  However, there have been many 30-year periods in which stocks dramati­cally outperformed bonds.