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Nobody Gets Out Alive!
One of the first questions retirement and financial planners ask their clients is a bit tricky. As in \"when are you going to die?\" Senior Correspondent Mike C...
This is the last installment of a 3-part series by guest columnist Arthur Stein. He kindly agreed to help out while I am on vacation (but still thinking of you!) If you missed either parts one or two, they ran June 24 and June 25 and they are archived (he said, pointing to the left hand column of the page.)
Today’s subject is insuring that you don’t run out of money in retirement.
How Long Will You Live in Retirement?
by Arthur Stein, CFP
How long a retirement should you plan for? That is a key assumption in your retirement planning. Longer retirements cost a lot more than shorter retirements. And longer retirements magnify the negative effects of inflation, bad investment decisions and the shortfall in the FERS cost of living adjustment.
Unfortunately, we know when we will retire but we don’t know how long we will live.
One possible solution is to Google “How long will I live” and use one or more of the life expectancy calculators that it displays. I found five on the first page of results.
I personally tested four.
The questions that I had to answer dealt with build, family history, marital status, tobacco use, stress levels, hours of sleep, cholesterol levels, blood pressure, driving habits, income, educational status and other issues.
The results varied much more than I expected. One life expectancy calculator estimated that I would live to 93, two estimated 86 and a fourth 88.
The range of results didn’t inspire a lot of confidence. Especially the life expectancy calculators that calculated my life expectancy at 86 and 88. Why should I die in my 80s when my father is alive at 90 and my mother is alive at 85? How about my great grandmother who died more than 40 years ago in her 90s?
One calculator, http://gosset.wharton.upenn.edu/mortality/perl/CalcForm.html, produced somewhat more detailed results. In addition to displaying my life expectancy (86), it also stated that I had a 25% chance of dying before 78 and a 25% chance of living beyond 95.
It is better to overestimate than underestimate your lifespan when doing financial planning. If you have enough investments to last to 95 and you die at 75, that is a personal tragedy but not a financial tragedy. However, if you only have enough investments to last to 85 and you live to 95 – broke for the last 10 years – that would be a personal and a financial tragedy.
If you don’t want to use the calculators, at least consider:
- Your relatives who lived the longest and why should you die sooner?
- Current lifestyle, health care and physical condition. If you don’t smoke, drink moderately, don’t have a life threatening disease and control your weight, cholesterol and blood pressure, you should assume a long (90+) lifespan when doing your financial planning.
Arthur Stein is a Registered Representative of MML Investors Services, Inc. (301) 657-7770.
Nearly Useless Factoid
This summer, Sheila Taormina will become the first woman to compete in 3 Olympics in 3 different sports.
To reach Mike once he returns from vacation: mcausey@federalnewsradio.com
To reach Mike’s (non-vacationing) editor and factoid composer: skubota@federalnewsradio.com
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