Are You Miscalculating How Much You Need in Retirement? What is Life Expectancy

I have said it before that I am not a huge fan of the 4% safe withdrawal rate discussion.  It doesn’t make a whole lot of sense to me.  What you are allowed to take out means nothing if you need the funds, but I digress to today’s point – there is another part of retirement that is often miscalculated, Longevity and Life Expectancy. There seems to be confusion as to what life expectancy actually means when they are planning for retirement.

What is Life Expectancy?

Life expectancy at its simplest form is just giving you the average length you have left on this amazing planet planet.  Not a death sentence.  My buddy’s grandfather just turned 103 a few weeks back. ONE HUNDRED AND THREE YEARS OLD! He was in college when the stock market crashed. He was my age we were literally in the middle of WWII.  For heaven’s sake he hadn’t even met a hippie yet and he was 50.  By 70 he voted in Reagan (never asked him but I can be damn sure) and by 90 he was still swimming a few times a week and saw the new millennium.   Is he anomaly? Of course, but consider,

According to data compiled by the Social Security Administration:

• A man reaching age 65 today can expect to live, on average, until age 84.
• A woman turning age 65 today can expect to live, on average, until age 86.

And those are just averages. About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95.

…and that is just data from the Social Security Administration! Imagine if you have a clean bill of health how much your odds must increase? or if you get underwritten for insurance at an advanced age? It is the insurance company’s job to literally know when you are going to die, and considering some have been around for 150+ years we can assume they are pretty damn good at it.

So if a 65 year old today has about a 25% chance of living till he is older than 90 then wouldn’t it be prudent to plan to be that 25%? and subsequently create a retirement income stream or build a bucket (or in my case marry a sugermomma) more efficiently and with longevity in mind.