Life expectancy

Preparing for life after work. RRSPs, RRIFs, TFSAs, annuities and meeting future financial and psychological needs.
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Koogie
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Life expectancy

Post by Koogie »

A very interesting new article below. I have said before that both DW and I expect to have shorter to much shorter life expectancy than general but the general expectancy, it appears, is ever increasing toward the maximum span. Looking at "squaring the survival curve" it seems like even we might have to begin to worry more about excess longevity.

Squaring-The-Survival-Curve And What It Means For Retirement Planning - Michael Kitces
https://www.kitces.com/blog/squaring-th ... -planning/

""Because the interesting phenomenon of recent advances in life expectancy in particular is that while overall life expectancies have been rising, most of the gains are attributable to people living closer to the maximum human lifespan (rising up towards about 115 years), and not as much from increases in the maximum age itself. ..""

""One potentially concerning behavioral consideration is the role that the availability bias may play in influencing longevity forecasts. Many clients forecast their own life expectancy based on the longevity of family members. While it appears that genetics play a significant role in longevity and it’s reasonable to take family health history into consideration, ironically, squaring-the-curve may mean that individuals with the lowest longevity expectations are actually the most prone to significantly outlive their expectations!""

""The reason is that people with longevity in their family already tend to die of old age, whereas families with without longevity often die of other health conditions. Yet, if squaring-the-curve results in increasing survival rates without a corresponding increase in maximum age, then the bulk of the gains in survival rates will go to those who aren’t dying of the same ailments that claimed the lives of previous generations. In other words, someone who has a family history of living into their 90s of 100s may have a good reason to believe they will also live that long, but there isn’t a huge risk they will live significantly longer. However, someone without longevity in their family who believes they will die in their 70s likely has the biggest “risk” of living 20-30 years beyond their expectations.""
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kcowan
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Re: Life expectancy

Post by kcowan »

Great article. Thanks for posting it.
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kcowan
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Re: Life expectancy

Post by kcowan »

Here are a couple of related items:
1) A longevity calculator:
Calculate your current life span
2) One of the summary charts from the article:
Image
The latter chart can give you confidence if you choose 90 percentile rather than 50.
For the fun of it...Keith
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Re: Life expectancy

Post by cardhu »

Interesting, but for retirement planning purposes, it seems self-evident ... if I plan for my nestegg to last to age 100, I will have a lower “risk” of outliving my money than if I had planned for my money to last to age 80. I think that remains true, regardless of one’s family history, or genetic predisposition.
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Re: Life expectancy

Post by kcowan »

Agreed! But most retirement sites use life expectancy which I call the 50% solution! So most people that go along with it are under planning for their retirement life. And they do it to 3 decimal places!
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Re: Life expectancy

Post by izzy »

As A 75 year old whose grandparents made it into the mid sixties and whose father died at 70 I assure you that I feel much more comfortable that I planned to age 90 than to age 80.It may well be that I will only have another 5 years or so and that the taxman will thus reap a harvest but that means that others in our society will benefit from my savings even if I don't.
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Re: Life expectancy

Post by cannew »

Another 75 year old and we've projected our portfolio to age 96. Our investments will continue to provide more income than we need, which is reassuring, even if we both need to go into an Assisted Living home.
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Re: Life expectancy

Post by Flaccidsteele »

I'm still trying to figure out if this is good news or bad news :P
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Re: Life expectancy

Post by cardhu »

cannew wrote:Another 75 year old and we've projected our portfolio to age 96.
Don’t you spend less than your dividend income stream? … Life expectancy is only relevant if you’re intending to spend your capital.
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Re: Life expectancy

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cardhu wrote:
cannew wrote:Another 75 year old and we've projected our portfolio to age 96.
Don’t you spend less than your dividend income stream? … Life expectancy is only relevant if you’re intending to spend your capital.
Agree. The issue for someone who spends less than divs/interest, is what do they do with their legacy. Not how long will it last.
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Re: Life expectancy

Post by twa2w »

SQRT wrote:
cardhu wrote:
cannew wrote:Another 75 year old and we've projected our portfolio to age 96.
Don’t you spend less than your dividend income stream? … Life expectancy is only relevant if you’re intending to spend your capital.
Agree. The issue for someone who spends less than divs/interest, is what do they do with their legacy. Not how long will it last.
Likely, but spending can increase substantially in final years and capital may begin to erode at that point.

A lot of planning seems to use a use a steady or level income throughout retirement whereas in reality that is often not what will happen
The first 10 to 15 years of retirement may be substantially higher spending years for travel and other activities, then comes a period of lower spending and then in the last few years which may stretch out further than people expect, expenses can increase substantially for care etc especially if separate facilities needed for a couple.

Of course if your dividend or income stream is higher than needs during your early and mid retirement years, chances of major erosion of capital and running out of money is slim.
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Re: Life expectancy

Post by OnlyMyOpinion »

twa2w wrote:
SQRT wrote:... Agree. The issue for someone who spends less than divs/interest, is what do they do with their legacy. Not how long will it last.
Likely, but spending can increase substantially in final years and capital may begin to erode at that point.

A lot of planning seems to use a use a steady or level income throughout retirement whereas in reality that is often not what will happen
The first 10 to 15 years of retirement may be substantially higher spending years for travel and other activities, then comes a period of lower spending and then in the last few years which may stretch out further than people expect, expenses can increase substantially for care etc especially if separate facilities needed for a couple.

Of course if your dividend or income stream is higher than needs during your early and mid retirement years, chances of major erosion of capital and running out of money is slim.
Yup. Family currently in this situation are burning $8k/mo. This is temporary but material.
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Re: Life expectancy

Post by SQRT »

OnlyMyOpinion wrote:
twa2w wrote:
SQRT wrote:... Agree. The issue for someone who spends less than divs/interest, is what do they do with their legacy. Not how long will it last.
Likely, but spending can increase substantially in final years and capital may begin to erode at that point.

A lot of planning seems to use a use a steady or level income throughout retirement whereas in reality that is often not what will happen
The first 10 to 15 years of retirement may be substantially higher spending years for travel and other activities, then comes a period of lower spending and then in the last few years which may stretch out further than people expect, expenses can increase substantially for care etc especially if separate facilities needed for a couple.

Of course if your dividend or income stream is higher than needs during your early and mid retirement years, chances of major erosion of capital and running out of money is slim.
Yup. Family currently in this situation are burning $8k/mo. This is temporary but material.
Agree that expenses can increase near end of life. Depending on your portfolio size, this may have an impact on final legacy balance. But it still will not depend on demise age, rather on how many years end of life extra care is required. Not a simple thing to plan for.
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Re: Life expectancy

Post by BRIAN5000 »

Not a simple thing to plan for
Use an average IIRC 2 years or so* put aside $250k and you should be close.

*The Essential Retirement Guide A Contrarian's Perspective Vettese, Fred Book - 2015

"At older ages, the length of stay in an LTC facility will tend to be fairly short, which keeps the overall costs in check. In a majority of cases, the LTC stay lasts two years or less. If the need for LTC arises at age 90, it will persist for five years or more in only one out of 20 cases."

http://business.financialpost.com/perso ... -term-care
This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed
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Re: Life expectancy

Post by twa2w »

True, but if you are the one in 20 or even worse, the one that hangs on 10-15 years in the nursing home??
And if you are a couple, this could mean more years total in care. And more expense.

Of course most people cannot plan for every eventuality. And in Canada we have a pretty decent safety net with gov funded spots in nursing homes athough some may not want to be subject to that.
Which raises the question as to whether, with gov finances, can they keep up to the increasing numbers needing care over the next several decades. I suppose that will then also drive up private care costs.
Depending on your age do you plan for 1.xx times current costs inflated out into the future.
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Re: Life expectancy

Post by kcowan »

Sounds like we can count on the proceeds from sale of our snowbird property 20-25 years from now to cover it for both of us.
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Re: Life expectancy

Post by SQRT »

Agree that nursing home care can be quite expensive. Depends on the care level. My mother has been in one for close to 4 years at about $7-8k/ month all in. The good news is she doesn't spend much more. For someone with a pretty good income (or assets) in retirement, it isn't that bad. Agree for someone with less means it can be onerous. But there are less expensive gov't subsidized places available. In my case, I'm in the lucky position that my pension will easily cover these type of expenses.
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Re: Life expectancy

Post by twa2w »

Not all are as fortunate as some for sure.
Even with a pretty decent pension today, if you live 20 more years and inflation comes back with a vengeance, and if you need care for both spouses, what looks like a good today could be short.
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Re: Life expectancy

Post by kcowan »

twa2w wrote:Not all are as fortunate as some for sure.
Even with a pretty decent pension today, if you live 20 more years and inflation comes back with a vengeance, and if you need care for both spouses, what looks like a good today could be short.
I figure the snowbird property might compensate for inflation after tax. And we will no longer need it.
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