It’s become a well-recognized phenomenon that life expectancies are on the rise, and have been for more than a century now. For many, this leads to the “inevitable” conclusion that someday we’ll all be living to age 150 and beyond, and that we need to plan for drastically longer retirement time horizons — or even that retirement itself will be transformed (or become irrelevant) if medical breakthroughs allow us all to enjoy 100+ years of active lifestyles. However, a fresh look at the data reveals that this may not actually be the likely outcome.
In this guest post, Derek Tharp — our new Research Associate at Kitces.com, and a Ph.D. candidate in the financial planning program at Kansas State University — delves into the nuances behind the changes in mortality rates over the past century and in recent decades, and what they imply about the future.
Because the interesting phenomenon of recent advances in life expectancy in particular is that while overall life expectancies have been rising, most of the gains are attributable to people living closer to the maximum human lifespan (rising up towards about 115 years), and not as much from increases in the maximum age itself. And in the past two decades, the empirical data suggests that the maximum lifespan of human beings has stopped increasing altogether, peaking out around age 115. As a result, future medical advances may simply make us more and more likely to live to that maximum age, but there’s little evidence to suggest that anyone is ever going to live to 150 and beyond… a phenomenon known as “squaring the (survival) curve”.
The significance of rising life expectancy being due primarily to an increasing likelihood of living to maximum age, but not increasing the maximum age itself, is that retirement planning may need to adjust for a longer active phase of life… or more pessimistically, for prolonged periods of substandard health as what might have killed us in the past now simply slows us down! The potential for continued squaring the curve may also dramatically change the pricing and even the relevance of various types of insurance products, as long term care insurance becomes less necessary (if we’re healthy for more of our lifespan), and annuity mortality credits become less available (because people die close together at the end of their maximum lifespan).
But the fundamental point is simply to understand that the ongoing rise in life expectancies doesn’t necessarily mean that someday everyone is going to live to age 150 and beyond. It may simply mean that more of us will live to approach what appears to be a “maximum” human lifespan around age 115… and in fact, recent shifts in who is living longer (and who is not) suggests that we may have already hit that longevity wall.