How long will you live? How do you know? Unless you have a pretty clear idea, it may be difficult to create a sustainable retirement income plan that will meet your income and legacy objectives.
Life expectancy tables are averages, so unless you are average, they probably won’t be very helpful. If you live a healthy lifestyle and have longevity in your family, you will likely live longer. Conversely, if you eat processed foods and take daily medications for a number of chronic conditions, you may not live as long.
So how can you determine your life expectancy? The Living to 100 Life Expectancy Calculator can help. Created by Thomas Perls MD, MPH, the founder, and director of the New England Centenarian Study, the calculator asks you 40 quick questions related to your health and family history and takes about 10 minutes to complete.
The last time I took the calculator, it predicted I will live to age 101. Those of you who know me know my mantra is Live Better, Longer. The way I see it, if I will live to that ripe old age, I want to get there in the best possible physical, cognitive, and financial shape.
There are myriad ways to extend the length and quality of our years, but let’s save that for future newsletters.
Let’s focus on the financial implications of extended longevity. Of all the risks we face in retirement, longevity is the greatest because it is a risk “multiplier”. That means the longer we live, the greater the likelihood that healthcare and long-term care costs will negatively impact our retirement income plan.
A well-designed retirement income plan takes into consideration the risks you can manage, such as healthcare, long-term care, sequence-of-returns, and longevity through insurance and annuity contracts and reverse mortgages, taxes, and Social Security.
Centenarians are the fastest-growing demographic, with over 72,000 in the U.S. in 2019. I tell my clients that no matter what we plan for, we will be wrong. The question is, how wrong can we afford to be, and in which direction.
So, unless you have a Dr. Kevorkian gift certificate, it makes good sense to plan on living longer than expected.
In addition to our personal unknowns, there are societal ones as well. What about the future of Social Security and Medicare? How about inflation and taxes? Add interest rates and the markets to the mix and it can get daunting.
I like the process of putting together a jig-saw puzzle. All the pieces must be carefully put in place for the picture to emerge. It takes time and patience.
I will go into more detail about retirement income planning and risk management in future newsletters. For now, I leave you with a thought-provoking piece from the latest Knowledge at Wharton newsletter, Living to 100: How Will We Afford Longer Lives? It touches on a number of personal and macro issues and is sure to get you thinking.
As always, your feedback is appreciated.
