Thank you for taking time to visit Annuity Digest. The information on this page is intended to help you better understand the personalized life expectancy results that were sent to you in email.
This page contains the following information:
- A brief explanation of the results you received in the email.
- An explanation of why this information is important.
- An explanation of what you can do with this information.
- Some suggested next-steps for you to consider.
Your personalized results are not numbers that are cast in stone. In fact, your life expectancy changes and likely increases as you grow older. The figures you received are expected values based upon existing actuarial tables. In other words, the figures represent the statistical “middle of the road” in terms of possible outcomes. Many people live longer than expected, and many live shorter than expected. Since life expectancy is a great unknown for almost everyone, a natural starting point is this middle of the road value.
Again, your life expectancy is a big unknown or “uncertainty.” In fact, the risks related to life expectancy are some of the most daunting challenges for retirees. Longevity risk (which is discussed further below) is right up there with health care costs, inflation and capital market volatility.
Life expectancy also happens to be a critical factor in retirement planning. Understanding life expectancy is important because much of the retirement planning process involves:
- Determining the level of spending—and subsequently income—that is required during retirement.
- Figuring-out how your income sources and savings will support the desired level of spending.
One obviously has to have some sense of how long retirement might last in order to make reasonable budget decisions.
Underestimating the number of potential retirement years can result in unsustainable levels of spending and the possibility of entirely depleting savings while in retirement. Outliving one’s savings is referred to as longevity risk.
What Can I Do with this Information?
Here are some things you can consider acting on with this information:
- Use your life expectancy figure as a starting point when determining a desired level of spending in retirement. For example, if your life expectancy is 25 years, then use 25 years as a starting point for how long your funds need to last in retirement. A level of spending in retirement that does not last as long as your current life expectancy is probably not sustainable. In other words, it does probably does not make good financial sense.
- It is important to understand that there is a good chance that you will live longer—possibly much longer—than your current life expectancy. While living longer than average is generally considered a good thing, you need to acknowledge and understand the financial risks associated with longevity.
- There are a number of planning decisions, tools and products—including annuities—that can address or “mitigate” longevity risk.
A Set of Next Steps for You to Consider:
- If you are married, use our free calculator to understand your life expectancy as a couple (it is very different than your individual life expectancy).
- Use our free calculator to determine your retirement sustainability. Retirement sustainability is the likelihood that a desired level of spending is sustainable over your lifetime. Click here to request a free retirement sustainability report.
- Use our free calculator to learn the amount of guaranteed lifetime income you could expect to receive from a life annuity. Life annuities are one way to effectively deal with the challenges of longevity risk. Click here to access our free annuity calculator.
