Future life expectancy

One of the hard parts about retirement planning is longevity risk: the risk that we’ll live so long that we run out of money. Google’s “Project Calico”, the Methuselah Foundation, the Glenn Foundation, the American Federation for Aging Research, and the Ellison Foundation are some of the efforts to “cure death” and allow people to live substantially longer. That would obviously cause havoc with current retirement planning.

But there’s also evidence that, the short term at least, we may have hit a plateau. Last month an article in Nature claimed that humans will never live much beyond 115. They noted that while average life expectancy has increased that “maximum ages” seem to have plateaued.

They found that in the 1990s the “maximum age” was 114.9 years and has stayed there for the past 20 years.

Now there’s another report that fears of needing to account for a 50-year retirement may be premature. The Society of Actuaries just released their latest findings on mortality improvement and found that the life expectancy for 65-year-olds is now six months shorter than in last year’s actuarial study.

A 30-year retirement (that is, living until 95) is less conservative that it was 20 years ago, especially when we’re talking about a couple. But it doesn’t seem like there is strong evidence yet of needing a major change. Instead of planning for a 30-year retirement, simply extending that by a few years and planning for a 35-year retirement looks relatively safe.

Of course, life expectancies increase by about 1-year per decade. So if unless you are already in your 60s you need to take that into account. That means a 60-year old couple should be planning for a 35-year retirement but a 30-year old couple should be planning for a 40-year retirement.

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