A frequent retirement planning question relates to longevity. Our job would be easier if we knew how long all of us would live. Since we don’t know, we must make some prudent assumptions.
This piece from the Capital Group is a great exploration of some of the issues involved in planning for longevity. Life expectancy at birth is less useful once someone has already reached retirement age. “For example, it makes no sense for a female who has reached age 84 to base her retirement-planning horizon using the Social Security Administration’s statistical average that, when she was born, predicted she would live around 80.1 years.”
We should think about life expectancy from where we are now, not the expectation at our birth. “In fact, an 84-year-old non-smoking woman in excellent health has a 50% chance of living about eight years... This same prediction indicates there is a 10% probability that she could live to 100.”
Married couples tend to live longer, with smoking history and other factors showing that every individual has a unique and individual planning horizon to consider.
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In a meeting this week, a client asked if we prepared scenarios where there is a total spenddown of assets. This often comes up when there are no heirs to prepare for OR when a parent doesn’t want to leave a large inheritance.
And the answer is no, usually we don’t. In the early years of retirement, we need to plan for range of possibilities, including a long (and hopefully healthy) life. As you get older, the variables reduce and it is possible to revisit those calculations, but even then, caution is warranted with the cost of long-term care and other later-life needs.
There are tools and products that can help support income for the exact length of your life, but they come with some tradeoffs that must be weighed carefully. And we are here to help with those considerations.
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Some other interesting things:
- As we use AI more and more in daily life, it makes sense to see how these tools develop. OpenAI noticed that their models were mentioning goblins and gremlins with unusual frequency. They shared this explanation of the “Goblins in the Machine.”
- This is a very interesting review of research into fatherhood and parenting.
- The Iran conflict has led to an aluminum shortage, affecting countries like India, who rely on that source. Diet Coke parties are one answer to the situation. We know some people who would be quite concerned if the shortage starts to affect the U.S. soda supply.