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Don’t Underestimate Your Life Expectancy


Wayne Curtis  Are you putting your retirement finances at risk by underestimating your life expectancy?  If so, you are in good company.  According to a report by the Society of Actuaries, more than half of retirees and pre-retirees are in this category.  And, significantly, 40 percent underestimate their life expectancies by five or more years.
Underestimating your life expectancy can result in inadequate resources for your retirement needs. You may run out of money before you run out of life and spend your last years without adequate funds to live as you would like.
Much of the problem lies in the increased life expectancy among Americans. Advances in medicine, better nutrition, and healthy lifestyles have caused people to live considerably longer than their parents and grandparents. To illustrate, look at how life expectancies have changed over the past half century.
In 1960, when Dwight Eisenhower was president, the life expectancy for a newborn male was 66.6 years. By 2012, the latest year for which complete actuarial data are available, this had jumped to 78.8 years. Female life expectancy rose from 73.1 years in 1960 to 81.2years in 2012.
Of greater importance for retirement planning, even if you correctly determine your life expectancy, chances are you have not provided sufficient funds for the possibility of exceeding it. The recently-updated Society of Actuaries 2014 mortality table estimates that a male who reaches 65 years of age in 2014 has a life expectancy of 21.6 years.  A female who reaches age 65 has a life expectancy of 23.8 years.
The implication of the findings is that all citizens should be more aware of their longevity and what it means for financial planning. Information on life expectancies can be gleaned from one of numerous readily available mortality tables from the Internet, libraries, and insurance companies.
Various studies underscore the fact that many people have little or no retirement savings.  If you are in this category, it is imperative that you start investing funds for retirement. You should also put aside an extra amount in the likely event – given the advances in medicine and science you will live beyond your normal life expectancy.
As a side note, the best way to invest is to pay yourself first by having funds automatically deducted from your paycheck.

Wayne Curtis, former superintendent of Alabama banks, is a retired Troy University business school dean.  Email him at wccurtis39@gmail.com.