Longevity – Planning to Live Too Long vs Cutting Yourself “Short”

In a recent  MarketWatch article, author R. Powell advocates planning to live to age 100.

Of course this article was interesting to me as I have these conversations all the time. The challenge with deciding how to plan longevity is this:

If you plan to live a long time, say age 100, then for many of you, often means less money to spend at 68. And if we conveniently assume that you’ll die younger, say at age 82, then  we can splurge a bit more at 68.

Moreover, many people are often familiar with the general tables on life expectancy put out by actuary groups. These often list life expectancy around 80 give or take a few years depending on the table, and sex of the person. However, what many people do not pay attention to is the fact that, the longer you live, the longer you WILL live. For example, as the article states, if you’re age 55, you have a 66% chance of making it to 80 whereas those chances are lower for a newborn.  One of the more succinctly poignant quotes from the article was this:

“For an individual or couple planning their own retirement, I’d suggest using a conservative life span,” he said. “Part of the reason is that the consequences of running out of money typically weigh much more heavily than being able to leave a bequest.”

So the challenge is a bit psychological, as it tests greed vs generosity, enjoyment of life vs continued prudence for some, and it also tests how we view the future. when I discuss this topic with clients, I don’t get resistance to the idea of planning well past 90 for income. I think these days, people have enough experience with older relatives that they can see a reasonable chance of getting there themselves.

Sometimes though, I will meet someone who wants to spend too quickly and doesn’t care about longevity. This is a tough case because unlike many politicians (who often pass legislation at an older age and don’t live to see the fruit (poison) of their decisions), I will likely (percentages) be alive to see the fruit of my recommendations. And I don’t want to have to explain to a 92 year old why he ran out of money. I prefer to be conservative.

However, one way to balance this decision is to plan to travel and live more actively before age 80 and then leave the option open of selling one’s house or other large measures to fund a down-scaled life after age 80. This approach could work for many but when people tell me they want to keep their house and spend down their money, and I look at historic cost increases in property taxes, utility costs, food, gasoline and insurance, I do get worried.

use realistic thinking when planning your longevity and feel free to call us or drop a note on our contact form if you have questions.