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Why your life expectancy is much longer than you think

Why your life expectancy is much longer than you think post image

When we die is a matter of some personal concern. Ideally it won’t happen tomorrow, but it’s on the cards – particularly the card featuring the bony fella with the sharp gardening implement. In the meantime, our life expectancy matters because life is not cheap.

If you’re going to live off your portfolio it needs to be large enough to cover you and your loved ones against the most ironic investing risk of all – longevity risk.

Longevity risk for individuals is the danger that you hit the vitality jackpot but outlive your money.

The infamous 4% rule is calibrated for 30-year plans. However many of us have a realistic chance of lasting 40, 50 or even 60 years – and that’s without resort to scientific breakthroughs.

Blogger Early Retirement Now has shown that sustaining your portfolio through each added decade requires more risk and/or money. So we have to face the facts of life – we need an idea of how long our time upon this Earth might last.

Life expectancy: how long have I got?

The obvious way to guesstimate the length of your mortal coil is by using national life expectancy data. But if you simply google ‘average UK life expectancy’ then you’ll seriously underestimate your longevity risk.

Average life expectancy for males is currently 79.2 years. Females clock in at 82.9. But those headline stats do not squarely site you within swiping distance of Death’s scythe.

You can check how off-beam they could be for you by using the life expectancy calculator provided by The Office Of National Statistics (ONS).

Here’s my result:

Personal life expectancy using the ONS life expectancy calculator

If I type in my current age and sex then my average life expectancy is 85 – or 88 if I switch to being a woman.

I’m already up six years versus the UK male average of 79.2. Go me.

This happens because my personal statistic eliminates all the older people who are closer to Heaven’s Gate than me. Lifespans are expected to improve over time. My life expectancy would be 87 if I was 20 years younger and hoping to cash in on improved medical treatment, gene therapy, or artery-cleaning nanobots.

Please sir, can I have some more?

My chances of making my average life expectancy are higher than 50%, as you can see in the chart.

I’ve got a 25% shot of reaching age 94. I don’t fancy running the risk of going broke any earlier than that when the odds are so high.

I’ll even see my 99th birthday in one out of 10 possible futures.

From a planning perspective, 10% seems like a reasonable cut-off point. I’m prepared to take the risk of making it to a telegram from Her Maj without a penny left in my pot. That means I should plan for an estimated lifespan of more than 50 years if I retire today.

But I’m not retiring today. Moreover, today’s 65-year-old male is expected to live on average to age 86. That’s higher than my average of 85 even though I’m 20 years younger!

What gives? Was yesterday’s model male made of tougher stuff?

Well, the 65-year-old has already ducked the misfortune that can take out anyone at a younger age. By virtue of surviving to any given age, you patently haven’t died earlier.

In everyday life that goes without saying – I never congratulated grandma on her persistence. But it does matter in the average lifespan game.

The headline UK life expectancy figure measures death rates from birth. Therefore it’s lowered by everyone who fell at the earlier hurdles. By the time you’re 25, 65, or 102, that ‘from birth’ number is less and less relevant. It’s the average mortality data for your current age cohort that tells you more about your chances later in the race.

A quick tap into the calculator tells us that today’s 100-year-old is expected to make 102. They have a 25% chance of celebrating 103.1

Personalising life expectancy

The UK’s Institute and Faculty of Actuaries says:

In retirement planning, survival to the age when a pension starts is assumed, so it’s appropriate to use this higher lifespan estimate.

Popping your future retirement age into the ONS life expectancy calculator won’t give you a personalised result, but we can delve deeper into the data to find it.

To bag your own average life expectancy for the year you intend to retire:

Clickety-click on the ONS’ latest Past and projected data from the period and cohort life tables.2

  • We want the ‘Expectation of life’ datasets.
  • Choose your region: England, Scotland, Wales, or Northern Ireland.
  • Set your level of optimism – the datasets include projections of future life expectancy gains. Go with the principal projection if you like consensus, but high and low life expectancy projections are available to suit your mood. High life means future advances are unexpectedly strong, not “pick this dataset if you like champagne and sports cars.”

You’ll now be staring into a spreadsheet. What a way to spend your remaining life expectancy.

Choose from:

  • Males Cohort ex tab
  • Females Cohort ex tab

Ignore the Period tabs.

  • Pick the year you’d like to retire. I choose 2023.
  • Cross-reference that column with the age you’ll be in that year – see the ‘Attained age (years)’ column on the left-hand side of the spreadsheet. In 2023 I’ll be 52.
  • The number at the intersection is your average remaining life expectancy at that age.

If you get lost, the ‘Interpreting the tables’ tab on the spreadsheet will guide you home. Read the ‘Cohort tables’ section of the explainer.

What’s another year?

My year group (or cohort) will have 34 years left on average at age 52, according to the Expectation of life, principal projection, England.

That makes my average life expectancy 86, if I can hang on until 2023. I gained another year! I’ll therefore stick with my initial plan of assuming I could still be going like a Duracell bunny at 99. If you’re younger or intend to retire later then you’ll probably get a more meaningful result.

I could push my 10% cut-off to age 100, but this kind of fiddling around the edges runs into the illusion of precision. The risks you take in retirement are not managed by decimal points.

The main thing is to use cohort life tables and not period life tables for your personal estimates.

Period life tables assume that mortality rates remain the same for the rest of your life. They are useful for comparing results across populations and time periods.

Cohort life tables adjust life expectancy for each year group according to past and projected mortality improvements. Your cohort life table result shows your chances of survival given your year of birth. It filters out the less relevant results of people who are younger or older than you.

The Institute and Faculty of Actuaries agrees individuals should use cohort life tables:

If the question is “What lifespan should I expect?” the technically correct answer will be given by cohort life expectancy for a specific cohort.

The average UK life expectancy figures – the 79.2 for males and 82.9 for females – are taken from period life tables. Media outlets and misinformed financial planners are prone to quote these better known numbers but this is a mistake, as the ONS points out:

In the 2016-based projections, cohort life expectancy at birth is typically around ten years higher than the respective period life expectancy at birth.

The ONS life expectancy calculator uses cohort life table data for your current age. Sure, cohort life expectancies are only as good as their assumptions but we can only use the tools we’ve got. You can always check your results again in another five years or so, as mortality projections are apt to change.

Incidentally, all that hyper local data that suggests you’ll live to 206 if you live in Kensington, or die in the cradle if your neighbours love their fags and chips? It’s all period life stuff – don’t rely on it for personal use.

Life expectancy factors

There are still plenty more years up for grabs though. You should expand your plan if you score well on these industry-standard factors:

  • Smoking (it’s bad apparently)
  • Heavy drinking (you get a bonus for moderate alcohol consumption)
  • Diet (plus points for heavy chocolate consumption. Okay, wishful thinking on my part)
  • Education (more!)
  • Physical activity (more! But not the dangerous kind. Fit base jumpers don’t last)
  • Employment (have a job, have a good job)
  • Disposable income (more!)
  • Marital status (more! I mean don’t be divorced, widowed, or messing about on Tinder)
  • Preexisting conditions / family health history (have good genes, don’t get sick)
  • Early life conditions (as above and don’t be malnourished in childhood)
  • Medical technology (take good drugs)

We’re wandering into self-certification territory here because the ONS don’t program these factors into their cohort life tables. There are various life expectancy calculators (often devised by insurance companies) that filter for some factors.

I’ll cover such calculators in the future, but the sneak preview is I typically levelled up my life expectancy by a few more years using them because I tick most of the boxes above. Though my mum was surprised when I quizzed her on my in utero conditions.

You’ll probably do well too, dear reader. It’s a scientific fact that Monevator is good for your health. Alright, it might just be that Monevator is read by people with above average income and education levels rather than chain-smoking stunt drivers, but you could consider extending your estimated lifespan by another five years to take into account your VIP status (just pop the promo code MONEVATORNORIP into the calculator).

Obviously this stuff is highly uncertain. I haven’t read anything conclusive on how much each factor contributes to average life expectancy, or on how much they bleed into each other.

Still, we more or less know the score: broccoli good, smoking bad, and more money means less time spent in the NHS queue.

What’s less obvious is how the introduction of your significant other should affect your life expectancy planning and how that calculation affects the viability of your financial plan. We’ll cover that in the next post.

Take it steady,
The Accumulator

  1. A 125-year-old has a life expectancy of 126, then the calculator breaks. []
  2. Land here for ONS life expectancy updates, too. []

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{ 34 comments… add one }
  • 1 Jane Steen May 21, 2019, 11:37 am

    If you really want some sleepless nights, how about calculating your likelihood of you (or your significant other) getting dementia? And then plugging in current and expected care home costs? And factoring in how poor you have to get before the Powers That Be will toss you a few coins to help? This is a grim reality that’s surfaced with the current elderly generation: a significant percentage of us outlive our marbles. Once 24-hour care becomes a necessity, which it tends to do about five years or so into the Alzheimer’s story, a care home becomes the cheapest option–and care homes cost a lot more than living at home. How do you plan for that? I’d love to see some analysis.

  • 2 John @ UK Value Investor May 21, 2019, 12:02 pm

    My assumption is that I’m going to live forever, which is why I like a pure income approach to retirement with no capital drawdowns. Who knows what whizzy stuff they’ll come up with to extend life 30 or 40 years from now. And if that means some unspent capital outlives me then that’s fine. Some combination of charities and children can have what’s left.

  • 3 TheFireShrink May 21, 2019, 1:27 pm

    I’ve ranted about this before. It comes down to the fact as a society we’re really bad at talking about death, dying and being vulnerable. People prefer to ignore those numbers and the potential future. The predictive evidence we do have is poor, and likely to change in the next decades. Hence, like John, I’d prefer to be on a perpetual financial path rather than a drawdown path.

  • 4 Nelson May 21, 2019, 2:08 pm

    Indeedably had a tool that charted this life remaining data by age and sex onto a map of the world. Huge variations between countries towards the greyer end of the spectrum.

    https://indeedably.com/acceptable-incompetence-is-absurd/

  • 5 brod May 21, 2019, 4:10 pm

    We’ll, I too have a life expectancy of 85 but my 90% only gives me 98. Should I feel short changed compared to The Accumulator?

    Probably not. Last year at 52, I had a heart bypass (God bless the NHS!) and when I was 30 I was knocked over and taken into hospital in a coma with head injuries (I’m one of their best customers) so I’m hoping it’s nine lives rather than 3 strikes and you’re out!

    So I’ve (mostly) enjoyed life. And saved some for my retirement. I go part time at the end of the month to allow more time to keep fit, and hopefully fully retired at 55 (tbc with my better 3/4), when I can access my SIPP and start dumping it into ISAs.

    I think obsessing over details of when you might or might not die won’t help. Just remember it’s an average.

    And dementia? Social interaction, exercise, chess, crosswords, soduko and luck. Having watched my father be hollowed out by it over the last decade before finally dying last year, I’m not putting my wife and kids through that. (And if you wonder about who is going to pay for care homes, pay for it yourself if you’ve any assets, it’s not your kids money!) By the time you need residential, you’ll be past caring.

  • 6 Barn Owl May 21, 2019, 7:36 pm

    I don’t think that the pot size you need to retire is a strong function of the duration of retirement. The sequence of returns risk is strongly correlated with the performance in the first 10 years of retirement. see https://www.kitces.com/blog/understanding-sequence-of-return-risk-safe-withdrawal-rates-bear-market-crashes-and-bad-decades/

    What was surprising to me about ERNs SWR series was the small difference between the SWR for a 60 year retirement with capital preserved and a 30 year with depletion. The explanation as Kitces shows is that you need to design for the worst case first 10 years (historically 1966 to 1976 for the SP500).

    Right now I am figuring that if I can get the required withdrawal rate to around 3% and use a CAPE based adjustment for market valuations as suggested by ERN then I should be good for the long term and even for later generations of the family.

    So I am not sure that precision about life expectancy is the most important point – its more about the worst case sequence of returns problem.

    As previously discussed on this site, the people that achieve income purely through dividends rather than capital gains as well are missing out – but the benefit they have is the simplicity managing the portfolio.

    So to me trying to get precision on life expectancy decades ahead of time, doesn’t really affect my calculations so much.

  • 7 ZXSpectrum48k May 21, 2019, 9:41 pm

    I think the importance of wealth in deciding healthcare outcomes will increase. The wealthiest may be able to effectively “buy” longevity. As a result I do wonder if UK “leanFIRE” adherents are making an error by not including a sum in their future liabilities for private medical care. The NHS is the exception, not the norm. Over a 50-year+ horizon, it may well cease to exist, be means tested, or have it’s focus narrowed.

    I’m also surprised people aren’t more worried about nursing care costs. I’ve thought about this potential liability given my parents have no assets or income above the state pension. Based on the data I’ve seen, it seems there is around a 60% probability that they need assisted residential care, for around 30 months at £3k/month. Contingent on that, there is then a further 60% probability they need an average of 27 months nursing care at £4k/month. The probability-weighted liability is around £175-200k but the right-side tail could exceed £500k+. What proportion I will have to provide vs. the government is a guess so I’ve reserved £250k for now.

    This is why I find the whole SWR debate difficult. The liability side is treated as a known quantity such that we “just” solve for the asset side. In reality, the liability side has as many unknowns as the asset side. Longevity and healthcare costs (and also the differential between healthcare cost inflation vs. broader inflation) are likely to be a significant part of those unknowns. As a result, I also tend toward treating my portfolio as a perpetual endowment, albeit I don’t distinguish between income and capital gains.

  • 8 Vanguardfan May 21, 2019, 10:54 pm

    @zx, what data are you using for residential care needs? My understanding (can’t remember where I looked now) was that it is something less than 50%. Certainly none of the three parents we have lost so far required residential care (I accept that things may change in the next 30 years).
    You can use an immediate needs annuity to mitigate against the worst case. Otherwise I tend to think my house should be adequate to cover excess residential care costs (above my secured income).

  • 9 dearieme May 22, 2019, 12:06 am

    “Otherwise I tend to think my house should be adequate to cover excess residential care costs (above my secured income).” And we hope this is true for the survivor of us. But what if I have to go into “care” while my wife still needs some of my income to live on and a house to live in? I have been unable to concoct a plausible plan for that eventuality.

  • 10 The Borderer May 22, 2019, 12:45 am

    @TA
    “…my average life expectancy is 85 – or 88 if I switch to being a woman.”
    If you have a partner or spouse then all you’re calculations should be on the basis of the likely longest survivor. Not exactly a win if you shuffle of this mortal coil leaving your wife penniless.

  • 11 Vanguardfan May 22, 2019, 7:29 am

    @dearieme – I think you would have to find a way of accessing the equity in the house. It’s less likely though, as two people living together can cope for longer than one on their own, especially with input from home carers.

  • 12 brod May 22, 2019, 11:49 am

    @zx – I think longevity is more related to lifestyle factors like obesity, physical activity, smoking, etc.

    Some even say alcohol, but not sure this is proven yet

  • 13 Matthew May 22, 2019, 1:49 pm

    Once youre in a care home, money wont really matter, just try to pass it on by then. I find it’s best not to think too much about insolvable problems like death, certainly dont let it get in the way of life, it should be something you hardly ever think about – its not something you need to be prepared for to do it properly, it just happens.

    In my work in the care sector people do die naturally, they dont make a sound, or even wake up, i dont think dying is painful in itself, although obviously it depends on what caused it. I think when we die we lose our ability to perceive pain or really know whats happening, and life goes on like it did before we were born. Our parents mostly brought us into the world to be happy, try to enjoy the ride, and try to enjoy the significant part of your life which is work – remember youre getting paid because youre helping somebody out and doing something useful for society, even if its in an abstract way or if its not appreciated, whatever you do is needed for a reason

  • 14 The Rhino May 22, 2019, 4:06 pm

    @ZX – could all this hedging against enormous liabilities, i.e. houses for everyone, 6 figure third-party care costs etc. be some sort of mechanism to justify current work levels?

    If you were to be truly honest, is the amount of time you spend working optimal for you?

    PS I have no idea how much you work, and for full disclosure, if I’m truly honest, then I’m working too much – so I haven’t got it right..

    Fully agree with the general gist that the whole SWR debate is largely a fantasy (certainly in the ‘lean-FIRE’ sense), ‘no plan survives first contact with the enemy’ and all that. The psychology of not having enough to meet some critical future need when you know you jacked it in early could be very, very tough to bear.

  • 15 The Rhino May 22, 2019, 4:11 pm

    Reading that back sounds like I’m making two contradictory statements.

    I think what I’m trying to say is that ‘lean-FIRE’ is probably madness, but not adjusting lifestyle when you’re a ‘fat-FIRE’ candidate is probably also madness..

  • 16 Eugene May 22, 2019, 4:11 pm

    I can’t help thinking life expectancy might go down due to obesity. Twenty years ago it seemed rare to see really fat people… Nowadays you see a lot of people that look like they’d struggle to get up if they fell down…

    It must take a lot of toll on a heart to push blood round a body that’s maybe 5 plus stone too heavy.

  • 17 dearieme May 22, 2019, 4:13 pm

    “I think you would have to find a way of accessing the equity in the house”: thank you Vanguardfan, I think you must be right. I wonder what the best way to do it would be for a house owned as tenants-in-common. Should action be taken while we are both compos mentis?

    Might this be a good topic for a post e.g. by MM who has written some excellent pieces on insurance? I think it was one of his pieces that made me wonder about buying an annuity for my wife but based on my life. That way she’d get the income while I lived and lose it only when I died and she’d no longer need it, by virtue of “inheriting” pension income from me. Unfortunately such a Purchased Life Annuity can’t be index-linked, apparently.

    Ideally, to keep such an annuity cheap it shouldn’t start paying out until I go into care. I have no idea if such an annuity is sold but I suspect not – because otherwise insurance against care costs would presumably be routinely available anyway.

  • 18 Vanguardfan May 22, 2019, 4:38 pm

    @dearieme, as I mentioned in my previous post, immediate needs annuities can be used for care costs. I’m not an expert though, and I agree that this would be a useful topic for a MM post…

  • 19 The Accumulator May 22, 2019, 5:58 pm

    @ Jane – many good US financial experts recommend taking out long term care insurance to hedge against dementia, care home costs et al. I’ve just had a quick look and it seems like similar products are available in the UK plus there’s immediate needs annuity as flagged by Vanguardfan:

    https://www.moneyadviceservice.org.uk/en/articles/immediate-needs-annuity

    @ Dearime and Jane: lots more in here about options and accessing equity without turning your significant other on the street:
    https://www.moneyadviceservice.org.uk/en/articles/self-funding-your-long-term-care-your-options

    @ Borderer – I’m coming to that in my next post. In the meantime I’m just making flippant gags 😉

    @ Brod – if you’re using the same calculator then we’ve probably got the same average life expectancy because you’ve already survived years I have yet to face, but you’ve got a lower long-life expectancy because you’re slightly older than me so I’ve got more chance of eking out a few more years due to some wonder drug or other.

    @ Barn Owl – there’s plenty of research from multiple sources that shows withdrawal rates declining into the 50th year while flattening out as the timeline extends. ERN is unusual for even bothering to look at 60 years but he thinks it declines still, and he recommends a very aggressive allocation to survive those decades to boot. His analysis shows success rates dropping like a stone if you try to face 60 years with the chunky bond allocations that are absolutely fine for 30 years. I don’t blame you for not worrying about precision. This article isn’t about precision, it’s about knowing what’s going on behind the headline stats.

    @ Rhino – I certainly hope the SWR debate isn’t madness as it figures pretty strongly in my planning. I don’t think I’m mad, but then who am I to judge?

  • 20 MrOptimistic May 22, 2019, 7:59 pm

    Well, as a chain smoking stunt driver (thanks for the shout out), I have been told that average life expectancy is reduced by 5 to 8 years owing to these lifestyle choices. So I’ll subtract that. Champagne and sports car back on the agenda.
    I have played about with the period interim life tables as column D lets you do probability predictions on arbitrary periods and joint life probabilities which you say you will deal with next time. It also lets you see what proportion of people born in your year havent made it this far. One of life’s smaller pleasures. But I had realised the difference between cohort and period tables so thanks for that, you have gifted me two more years ( on average).

  • 21 The Rhino May 22, 2019, 9:06 pm

    Using the term madness is probably a bit glib, but I strongly agree with ZX s last paragraph. If your margin of safety is big then the RE bit is great if that’s what floats your boat, but otherwise I would be wary of ditching the diversity that an income based on some form of labour provides. In this way I’m far more interested in what indeedably is doing as opposed to say RIT. ZXs margin is so big it’s neither here nor there what he does, that’s why I’m a little fascinated by the liabilities he’s dreamt up to try and cover. There’s some interesting psychology in there for sure.

  • 22 Vanguardfan May 23, 2019, 7:17 am

    Isn’t ZX’s last paragraph a rather opaque way of saying s*** happens?
    I can’t help thinking that this desire to accumulate wealth is essentially a way of trying (in vain imo) to protect against the arbitrary and unpredictable nature of life’s threats and setbacks. At the end of the day, money isn’t going to stop s*** – death, illness, relationship breakdown, all the other curveballs life can throw at us. It’s one way of building up resilience to cope with these things, but only one. Perhaps we are over emphasising the role which material security plays in both achieving fulfilment and in coping with undesired life changes. At the end of the day, life is fragile and short, and we must remember to attend to the present as well as the scary unknown future!

    (This isn’t a criticism btw, just a reflection. I have my own hoarding tendencies as I suspect most of us here have – we are self selecting. I find it helpful to try to identify and challenge my own emotions about money).

  • 23 The Investor May 23, 2019, 9:07 am

    Indeed. From memory very wealthy people say they’d feel secure at twice their current net worth — however many millions that current net worth happens to be! And of course the world’s elite keep homes around the world to diversify everything, with the most extreme looking to construct tasteful nuclear bunkers in New Zealand.

    It’s never really enough.

    With that said, given that @TA has chosen to follow a strategy of planning to spend all his money in his lifetime (not for me, not least for the reasons being discussed by @ZX et al, but hey ho) I think it’s a bit much to call trying to get a handle on how long that lifetime might be ‘madness’. 🙂

    If he was doing something like joining a gym, decreasing his contributions by the monthly cost, but increasing his longevity by a few months and reducing his SWR by 0.01% well then yes, that’s over-precision. But a “spend all the capital” policy that doesn’t distinguish between the chances of needing that capital at 80 versus 90, say, seems a bit madder to me.

  • 24 The Rhino May 23, 2019, 9:50 am

    @VF – wise words, sounds about right to me. Diversity and resilience are probably linked, and diversity to my mind doesn’t stop at asset allocation. Keeping labour options open and maintaining good family relationships (e.g. children may help you out at a later date) are all forms of diversity/resilience. And as you say, resilience in a large part is attitude and outlook which has little to do with the size of your portfolio.

    ZX seems to have undergone adaption in line with net-worth, but its clearly not the straightforward run-of-the-mill hedonic adaption. Its more an altruistic adaption, but currently nuclear-family focused, possibly the next step will be philanthropy? Or maybe there’s a tipping point and the work will stop?

  • 25 Snowman May 23, 2019, 10:00 am

    @Eugene

    I think you are absolutely right that life expectancy will reduce in the coming years because of the obesity and I would add diabetes epidemic. I think the data is starting to show this already. The actuaries underestimated life expectancy improvements in the past (not their fault on that one) but as a result they are now failing to recognise the underlying factors that are causing life expectancy improvements to level out and probably reduce.

    Population life expectancy is really best modelled as a complex adaptive system, and so simplistically just looking at the current trend isn’t going to help you project life expectancy going forwards, when you’ve missed the underlying causes and drivers of changes in life expectancy.

    The biggest factor is poor diet, resulting mainly from flawed national dietary guidelines since the 1950s, which don’t get challenged because of conflicts of interest from the cereal, sugar and pharmaceutical industries, confirmation biases of those who aren’t able to adjust their thinking based on the evidence, poor medical training on nutrition, and ethical beliefs biasing what we tell others to eat.

    By switching to a real food, lower carbohydrate, high healthy fat diet and avoiding vegetable (seed) oils we as individuals can greatly reduce our heart disease, cancer, dementia, and all cause mortality risks. And add in the more widely accepted non smoking, physical activity, good sleep, reduction of stress and you’ve got a potentially winning formula. Of course it is still a probability game but I’d rather play that game with the odds weighted in my favour.

    But don’t take my word on it, listen and read with an open mind material from Nina Teicholz, Ivor Cummins, Aseem Malhotra, Tim Noakes, Zoe Harcombe, David Unwin, Gary Fettke, Jason Fung, Dave Feldman, Stephen Phinney, Jeff Volek and Gary Taubes amongst others. Then look at evidence for current dietary guidelines and ask yourself if there is any apart from weak and flawed associational hypotheses that ignore confounding factors and the healthy user affect? Make the changes needed.

    You might have the problem of running out of money due to a long lifespan, but what a great problem to have!

  • 26 Aidan Williams May 23, 2019, 10:03 am

    When discussing longevity with my parents the other day, I let slip that my partner’s date of death was of course already in my retirement planning spreadsheet. Apparently, it’s only socially acceptable to discuss your own predicted date of demise! But you have to plan with all the significant information that you have at your disposal and life expectancy is an important modelling parameter. And is indeed much longer than people generally anticipate. My Grandmother lived at home to 100 years of age!

  • 27 Brod May 23, 2019, 11:16 am

    @TA – I figured that out 😉 It was a failed rhetorical device.

    I think people are over-thinking this. All you can do save so that you’re reasonably confident you’ve enough and roll the dice.

    I’m 53, but my wife is 38. The ONS site tells me she has a 25% chance of reaching 97 (59 years) and a 10% chance of reaching 102 (64 years). I’m planning in perpetuity, so state pension, small DB pension and a “whenever we fancy/need it” withdrawal rate from my savings for us. Plus whatever she can save until she calls it a day, which should be significant.

  • 28 The Investor May 23, 2019, 11:27 am

    @The Rhino — While I think general replying in line with people’s comments is fine, let’s not get too drawn into micro-speculating on other readers’ motivations please. You do this a fair bit, and I think it’s time to draw it in a tad on Monevator. This sort of thing stops people sharing, and can seem intrusive. You obviously can comment generally on hedonic adaption as you see fit.

  • 29 The Rhino May 23, 2019, 12:11 pm

    @TI – haha you’re absolutely right and its a bit naughty. In my defence, to some extent the format gives you that opportunity to delve into the bits you probably couldn’t/shouldn’t in polite-society but are actually really interested in! There’s maybe some value in that, but its a fine line..

    I will cease and desist and hope no-ones too offended. I’ve thoroughly enjoyed everyone elses contributions on this one, especially ZX!

  • 30 The Investor May 23, 2019, 12:37 pm

    @The Rhino — Cheers. I think it’s fine to fish with generalized leading questions addressed to nobody in particular (and not overly specific of detail!) If particular readers then want to respond with more detail, that’s their choice. 🙂 What can be frustrating (or off-putting, or worse) in a format like this is when one answers a question with some personal details, and then that detail is incorporated into what can feel like an unasked for question or a judgement (again, or worse) as to how you’re going about things. We all do it one way or another and I’m sure it will happen again, but it’s as well to try to keep it in check. 🙂

  • 31 { in·deed·a·bly } May 23, 2019, 3:00 pm

    There are some fascinating insights being shared in these comments! Thanks to everyone for contributing their thoughts.

    TA makes a very valid observation that longevity is an unknown, and therefore a risk. This creates a risk versus reward trade off.

    Run out of time before we run out of money, and we could have lived larger. Of course this is only certain in hindsight, and at that point we’re beyond caring.

    Conversely, run out of money before we run out of time, and we are likely to experience an inconvenient shock to our desired standard of living. State pensions, free healthcare, housing benefits, and food banks mean we shouldn’t perish from exposure to the elements nor starve… but the £5 burger and beer menu at the local Wetherspoons replaces the annual holiday to the French Riviera as the indulge of choice.

    One thing I’m resigned to is that while the timing and nature of those “life happens” events is unknown, the fact that something will randomly occur is virtually inevitable. The larger your free cash flow we have, the better equipped we are to ride out the storm. Many of these events are livelihood threatening, creating a cascading impact our chosen lifestyle.

    ZX makes some valid points about the pressures of providing for loved ones, who are unable to provide for themselves. It is worth remembering that this is a selfless choice, but a choice nonetheless. If we’ve raised our kids right they should be capable of fending for themselves, however convenient the bank of Mum and Dad may be. Our parents lived their own lives and made their own choices. We help where we can, a luxurious choice many won’t be willing or able to afford.

    I too am in the capital preservation camp. We can always make more money while we’re spry and able, but by the time we run out we’ll likely be too old to do much about it.

  • 32 The Accumulator May 23, 2019, 6:15 pm

    Hey, don’t get me wrong. I’d rather not spend all that comforting capital if I can possibly help it. I’d much rather be one of those case studies whose net worth keeps shooting up heedless of my attempts to spend it.

    But because sh*t happens I’m extremely interested in understanding what levers to pull to avoid the worst, if at all possible.

    Another way of framing ‘capital preservation’ is that really it’s saying: “I’m gonna use a SWR in the 2-3% range and history tells me that I probably won’t have to spend down my wealth at that rate.”

    Whereas I’m saying: “I’m gonna use a 3-4% SWR and history tells me that I probably won’t have to spend my last penny before I die.”

    It’s a risk I’m prepared to take for an earlier shot at freedom.

    Nobody is treating the liability side as a known quantity, you just gotta draw the line somewhere.

  • 33 Excel Man May 24, 2019, 10:48 am

    Interesting piece here in the TLS on mortality/immortality. No mention of SWR, though.

    https://www.the-tls.co.uk/articles/public/the-last-mortals-immortality/

  • 34 dearieme May 24, 2019, 4:22 pm

    @Vanguardfan: you’re right. We should aim to overfund my “care” using an immediate needs annuity so that my surplus income can pass to my wife. The capital for this trick may have to come from equity release.

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