Longevity

[imoldernu]

When we retired in 1989, our planning was less intense, statistically speaking.
It was simply a matter of looking at our assets, expectations for continuing income... SS, investment interest, sale of home (downsizing) etc. ... and expected major expenses.
It wasn't a matter of planning for a specific lifespan, but... how far would the money go? Dozens of large green spreadsheets later, the 1989 plan said, "good 'til age 76.

At age 53, in reasonable health, the back-up plan was to go back to work, some time in the next 10 years... or... do part time work to supplement the needs. We reviewed the plan once a year, with three alternate budgets... Nominal, austere, and best case.

As it turned out, even with "best case", the annual check ins, showed that we continued to be ahead of plan, to the point that now, our age 76 initial plan has turned into age 92+ at the current "comfort" level.

No specific point to this, except to think that the age of retirement, and the expectations are a matter for individual decision. We never considered our decision to be a "do or die" proposition. Not a matter of pride, or sense of success or failure. Just another part of life that could easily change.

 

[martyp]

Only thing you can do is take the engineering approach: get a rough guideline, design for a reasonable "bad case", build in a margin of safety, hope for the best (and possibly get insurance).

+1

 

[Big_Hitter]

Purely unscientific but the likelihood of everyone on this thread who are planning to reach 100 to actually reach 100 is laughable: either that or this is one amazing outlier group of people.

actually it's quite scientific


of course if we find a cure for cancer or Alzheimer's that would help, a lot

 

[ERD50]

Purely unscientific but the likelihood of everyone on this thread who are planning to reach 100 to actually reach 100 is laughable: either that or this is one amazing outlier group of people. ....

Do you really think that is what people are thinking (or am I misunderstanding you)?

There is a HUGE difference between "planning to live to 100" and "planning in case I live to 100".

I probably said this before, do you wear a seat belt because you plan to have a crash on that trip, or do you wear a seat belt in case you have a crash on that trip?

I think that is what people are saying. Is that laughable? What do you plan for?

-ERD50

 

[Big_Hitter]

What do you plan for?

-ERD50

Personally, I would use the joint life expectancy table - it shows that one of two 62 year olds husband and wife make it to 89 on average.


That's the conundrum of the account balance or DC approach - it's extremely difficult to plan without annuity income.

 

[LARS]

Do you really think that is what people are thinking (or am I misunderstanding you)?

There is a HUGE difference between "planning to live to 100" and "planning in case I live to 100".

I probably said this before, do you wear a seat belt because you plan to have a crash on that trip, or do you wear a seat belt in case you have a crash on that trip?

I think that is what people are saying. Is that laughable? What do you plan for?

-ERD50

The point I was trying to make is that if you are 60 today (let's say) and your parents died in mid-80's (let say) then to plan your current spending on a glide path to 100 or 105 is incredibly optimistic to the point of being nearly ridiculous.

It is most likely a "black swan" event for most. Sure you can plan for it, but why?

 

[RunningBum]

Do you really think that is what people are thinking (or am I misunderstanding you)?

There is a HUGE difference between "planning to live to 100" and "planning in case I live to 100".

I probably said this before, do you wear a seat belt because you plan to have a crash on that trip, or do you wear a seat belt in case you have a crash on that trip?

I think that is what people are saying. Is that laughable? What do you plan for?

-ERD50

+1000. Or to put it another way, if you plan for living only to 85 or some similar number, have you given any thought as to what will happen to you if you are one of the outliers that live longer? Especially if you are one of those who would prefer to leave with nothing in the bank?

 

[Big_Hitter]

I don't think it's a black swan event for one of two people in their 60s to make it to 100.

 

[Big_Hitter]

+1000. Or to put it another way, if you plan for living only to 85 or some similar number, have you given any thought as to what will happen to you if you are one of the outliers that live longer? Especially if you are one of those who would prefer to leave with nothing in the bank?

I'm not sure that most FAs do - they seem to be hard wired on these 25 year (or some other fixed number) payout plans. That can lead to life down by the river when you can least afford it.


Fact is you don't die at your life expectancy - a little piece of you dies each day until there is nothing left - take a look at the Lx in the mortality tables - that's what they do

 

[RunningBum]

The point I was trying to make is that if you are 60 today (let's say) and your parents died in mid-80's (let say) then to plan your current spending on a glide path to 100 or 105 is incredibly optimistic to the point of being nearly ridiculous.

It is most likely a "black swan" event for most. Sure you can plan for it, but why?

My mother's parents lived only to 58 and 63. She is 78, and her doctor says that barring accident or unforeseen illness, there's no reason she couldn't live to 90 or beyond.

Why plan for it? Because it would be truly miserable to be in my 90s or 100s without enough money to live in a safe place, eat properly, keep heat and A/C to a comfortable level, and pay someone to do things I can no longer do.

 

[LARS]

I don't think it's a black swan event for one of two people in their 60s to make it to 100.

I repeat if your parents died in their mid-80's... if they both lived to mid-90's then different conclusion.

To plan longevity to 100 without regard to your own "facts" will most likely lead to a very, very conservative approach, which seems to be the default of most of the posters. Personally I am looking to 95, which is an eternity away at age 58, and will adjust/make course corrections as time goes by.

 

[RunningBum]

I repeat if your parents died in their mid-80's... if they both lived to mid-90's then different conclusion.

To plan longevity to 100 without regard to your own "facts" will most likely lead to a very, very conservative approach, which seems to be the default of most of the posters. Personally I am looking to 95, which is an eternity away at age 58, and will adjust/make course corrections as time goes by.

Not necessarily. It could just be a different approach, such as using annuities. Taking SS later is similar to an annuity. It could also mean keeping a higher % of equities in anticipation of having a longer horizon.

I am being conservative with planning in case I live into my 100s. I don't think I'm being very, very conservative at all.

 

[Big_Hitter]

I repeat if your parents died in their mid-80's... if they both lived to mid-90's then different conclusion.

I'm not sure the actual age at death matters so much as the cause. My grandmother died at 22 and my grandfather died at 72. My mom is still alive at 86.

Similarly my FIL recently passed away at 90. His parents died in their 50s.

We've cured the acute causes of death and now just have the chronic causes.

Do you deal with mortality data professionally?

 

[RunningBum]

LARS, I don't think that planning to 95, with a mindset to adjust as needed, is much different from what many of us are doing. For example, I have a big house in a nice area, which I enjoy very much. My house isn't part of my financial plan, but if my finances run down (most likely because of longevity), I can sell it and still live comfortably in a less expensive place. That's part of my "plan" in case I live into my 100s. If I only make it to 70 or 80, I'll have enjoyed a good life here without shorting myself due to overly conservative planning.

 

[photoguy]

The point I was trying to make is that if you are 60 today (let's say) and your parents died in mid-80's (let say) then to plan your current spending on a glide path to 100 or 105 is incredibly optimistic to the point of being nearly ridiculous.

When you say "incredibly optimistic" do you have an actual numerical estimate for this conditional probability?

Given the tables in the OP (10% for white collar male workers reach age 99), it doesn't seem that unreasonable. It's not going to be the typical case, but I don't think it's rare enough to exclude from planning (especially when considering joint survivability).

 

[Big_Hitter]

also, RP2014 will continue to get "better" (i.e. LE at age 62 will get longer) as we age since it uses a two dimensional projection scale

 

[martyp]

My mother's parents lived only to 58 and 63. She is 78, and her doctor says that barring accident or unforeseen illness, there's no reason she couldn't live to 90 or beyond.

Why plan for it? Because it would be truly miserable to be in my 90s or 100s without enough money to live in a safe place, eat properly, keep heat and A/C to a comfortable level, and pay someone to do things I can no longer do.

Exactly.

This is why obsessing over the numbers on the table is not particularly useful. As in any investing it is a matter of risk tolerance. The mortality tables along with your own family history and individual health status is just a starting point. After that it is totally subjective as to how far out you WANT to plan your financial status. Some may want to plan for the possibility they will be the outlier that lives to be a 100. Others may plan to spend now and assume they won't live much beyond the mortality forecast. It's really up to you. The differences in various actuarial tables is a minor factor relative to your own particular needs and wants.

 

[Independent]

also, RP2014 will continue to get "better" (i.e. LE at age 62 will get longer) as we age since it uses a two dimensional projection scale

I'm not sure what you mean here.

My cohort number is for people who are 62 in 2015, and then uses the table's projection factors (MP-2014) for future years.

Are you referring to the cohort that will be 62 in 2025 as "better"?

 

[Big_Hitter]

Are you referring to the cohort that will be 62 in 2025 as "better"?

Yes.

The projection scale MP2014 uses both a current year and year of birth.

RP2000, however, just uses the current year (scale AA or scale BB) to project the mortality rates from 2000.

 

[Throwdownmyaceinthehole]

Or you could do this simple test to project your longevity The Stand-Sit Test That Predicts Longevity | Prevention

 

[samclem]

The point I was trying to make is that if you are 60 today (let's say) and your parents died in mid-80's (let say) then to plan your current spending on a glide path to 100 or 105 is incredibly optimistic to the point of being nearly ridiculous.

Well, if your parents died 20 years ago, there's been quite a bit of medical progress since then, and there will be a lot more in the next 20 years (when you'll reach 80.

But, medical progress aside, if both of your parents died in their mid-80s, they lived more than a decade beyond the average for their time--they were long-lived. For the >average< person who is 62 right now (i.e. no exceptionally long-lived parents), there is a 10% chance that they'll live to be 93 to 97 years old. (per the OP). Given that, and that both of your own parents lived about 10 years longer than average, I do not think it is "incredibly optimistic" for such a person to plan for the potential for reaching 100 or 105.

Sure you can plan for it, but why?

Because 1) it won't be very unlikely for some people and 2) being old and broke is worse than just being old.

 

[Independent]

Yes.

The projection scale MP2014 uses both a current year and year of birth.

RP2000, however, just uses the current year (scale AA or scale BB) to project the mortality rates from 2000.

We're drifting off into techie stuff here...
But, a one-dimensional scale will also say that people turning 62 ten years from now will have longer life expectancies than people turning 62 this year.
The IAM-2012 table uses a one-dimension improvement scale. If I change the "year turns 62" from 2015 to 2025, I add about one year to the 50/50 survival.

The second dimension allows for changing rates of improvement.

 

[rodi]

I like the mindset that imoldernu and W2R suggested... Plan to a certain age - but periodically relook at things.

And like RunningBum - my home is not included in my "plan A" retirement plans - but offers a valuable plan B or C - to sell and downsize, or sell and move to assisted living. That's one advantage to having a paid for home in an expensive area... it is such a significant chunk of my net worth (but not of my retirement assets) that it's a pretty darn good safety net against running out of money and living in a van down by the river.

 

[Big_Hitter]

We're drifting off into techie stuff here...

yes that's true - with 2D each YOB cohort has it's own projection scale


agreed, we'd better get back on topic before one of us (I, probably) gets another nastygram from a mod

the joint life expectancy should be an eye-opener to most posters, although I suspect most posters have a very conservative "plan" in place already

 

[nash031]

I think LE data will continue to "improve" - as in we'll average living longer - in the future and a big part of that may be the fact that smoking has fallen out of favor. I suspect my dad's pancreatic cancer that hit at age 78 was caused by his pack-plus-a-day habit for two decades... doctors keep telling him even now at 81 that he's in remarkably good health "except for the cancer treatment effects."

Personally, I plan for around 90. His dad made it to mid-80s. I'd guess my dad will make it to mid-80s. Mom's dad made it to mid-80s... but I'm not planning to hit 0 at 90 (a pension and perhaps deferring SS will make that largely irrelevant anyway!).