Life expectancy is a single number, derived from a single set of assumptions, and its usefulness is limited. It is not a guarantee that you will live exactly that long, but simply the number of years that people your age might expect to live on average. While a few people will undoubtedly live to their exact life expectancy and no longer, most people will live either a shorter or longer period of time – very possibly a significantly shorter or longer period of time. Although no one wants to be the person who lives for fewer years in retirement than expected, there is a significant financial risk involved in living longer, especially if your retirement income is not guaranteed for life (as might be the case for assets you draw down yourself from your savings). Therefore, it is very risky to rely on the life expectancy number when planning your retirement.
With this tool, standard mortality tables are used to inform you of the likelihood you will survive for various lengths of time. This enables you to see a much larger picture than just looking at a single life expectancy number. This analysis is carried one step further by analyzing life spans for couples. That is, the Longevity Illustrator lets you consider longevity as it affects your retirement as a couple, not just as individual partners. The Longevity Illustrator’s charts show the likelihood of the couple together living a given number of years as well as the likelihood that one or the other will survive a given number of additional years. All of this information is crucial towards planning a secure retirement.
The Longevity Illustrator will help provide you with additional perspective as you consider your retirement planning options. If you develop your retirement plan assuming that you will live only as long as your life expectancy, you may run out of retirement funds if you live longer than expected. (And there is a reasonable chance you will!) On the other hand, if you develop your retirement plan assuming you will live to 110, you may find yourself without adequate income in your retirement years. The question to consider is how much comfort you want to have that you will not exhaust your savings as you age.
As a default, the Longevity Illustrator shows you how long you might live from your current age. You have the flexibility to change the illustration age to see how long you may live from other potential retirement ages.
This tool is meant only to help you analyze your longevity risk and does not take into account financial aspects of your retirement planning. Using the Longevity Illustrator is just a starting point to help you consider your options for a secure retirement.
The projections shown in the Actuaries Longevity Illustrator are based on mortality tables used by the Social Security Administration in the annual Trustees’ Report. There are separate rates for males and females.
Because mortality rates show a long-standing trend of improving, the Longevity Illustrator is based on the assumption they will continue to improve according to the MP-2015 rates published by the Society of Actuaries. These improvement rates are applied to the 2010 Social Security mortality tables to project mortality rates to future years.
Additional adjustments are made for health status ranging from 80% to 125% depending on age and for smoker status ranging from 77% to 211% depending on age.
There are many factors that affect longevity. These include: income, family history, geography, life style, occupation, current medical conditions, and ethnicity. While these all affect longevity, the four factors (age, gender, smoking and health) chosen for this calculator have been shown to account for a significant amount of the individual variations in longevity.