A visit to an online longevity calculator might seem like a morbid exercise.
No one wants to think about dying. And one might argue that a life expectancy calculator never dispenses good news. It tells you you’re going to die young, a scary prospect. Or it tells you you’re going to live a very long time, which means you’ll be dealing with the aches and pains of aging that much longer.
In the retirement planning industry, however, longevity matters.
Many Americans lack basic longevity literacy. For example, lots of us know that American life expectancy at birth is around 80 years: a little higher for women, a little lower for men. Fewer of us know life expectancy rises with age. If you reach age 50, your life expectancy rises to 82 if you are a man,
85 if you are a woman.
And those are averages. Retirement planners don’t care that you are likely to live to 85. Instead, they worry that you might live to 90, 95, or 100.
A retirement plan has to cover every scenario, including the one in which you live a lot longer than you expected.
“I don't plan to a life expectancy. I plan to a longevity risk,” said Laura Mattia, a certified financial planner in Sarasota, Florida. “Those are different things. Life expectancy is the median, which means roughly half of people outlive it. Planning to the median is planning to run out of money half the time.”
Many Americans underestimate how long they are going to live
When American workers plan for retirement on their own, experts say, they tend to gravely underestimate how long they are going to live.
A DIY retirement planner might assume they will die by 80, based on those familiar life expectancy figures at birth. For anyone who makes it to adulthood, however, they’re too low.
Someone approaching retirement might guess how long they will live based on a parent who died of a heart attack at 80, or a grandparent who died of cancer at 70. But those guesses, too, are probably low.
When your parents died “is actually not that strong a predictor” of your own longevity, said Gal Wettstein, associate director of health and insurance at the Center for Retirement Research at Boston College.
Your parents and grandparents were more likely to smoke, which is a major longevity limiter. They lived in an era when cancer, heart disease and other maladies were more lethal.
"Something that killed your parents or grandparents may be manageable now," said Jeyaraj Vadiveloo, a professor and director of the Janet and Mark L. Goldenson Center for Actuarial Research at the University of Connecticut.
You may be healthier than you think
Older Americans also tend to underrate their own health.
A typical 60-year-old might take two or three medications a day to manage hypertension and cholesterol. Maybe they’ve already survived a health scare.
From that evidence, the older American might conclude they are in ill health, and not long for this world. And they are probably wrong.
“Lots of people will think that they are unhealthy because they have high blood pressure, or something like that,” Wettstein said. “That doesn’t mean you’re less healthy than the average.”
To wit: Roughly three-quarters of Americans over 60 suffer from hypertension, according to federal data.
For all those reasons, Americans tend to underestimate how long their retirement is going to last.
A recent survey by TIAA Institute tested Americans on longevity literacy. The survey asked how much longer a 65-year-old American woman is likely to live: to 82 years old, 87, or 92.
Roughly a third of respondents chose the correct answer: 87.
The pros and cons of longevity calculators
For older Americans who might be underestimating their longevity, a life expectancy calculator can provide an instructive lesson.
The Social Security Administration offers a pretty basic calculator: You enter your gender and birth date, and it tells you how long you’re likely to live.
Northwestern Mutual offers a more nuanced Lifespan Calculator. It considers family history, stress, exercise, diet, driving habits, smoking and drug use, among other factors, before estimating how many years you’ve got.
The University of Connecticut offers a Healthy Life Expectancy Calculator. It asks about education and income levels, both factors in longevity, as well as fitness, diet, sleep, drink and diabetes. Then it calculates your remaining “healthy” and “unhealthy” years, which is a sobering thought.
Spend an hour or two with longevity calculators, and you'll see patterns: People who exercise, eat right, drive safely and don't smoke tend to live longer.
"The important thing about that calculator is not just the number," Vadiveloo said. "It's the things that you can do that are within your control that can extend that healthy life number."
Retirement experts harbor mixed feelings about longevity calculators. They can provide an illuminating glimpse of longevity, but their calculations are only rough estimates.
“It’s not going to tell you when you’re going to die,” said Craig Copeland, director of wealth benefits research at the Employee Benefit Research Institute. “It’s going to tell you when a group of people like you are going to die.”
Mattia, the Florida CFP, likes the Longevity Illustrator, a life expectancy tool offered by the actuarial community. It offers longevity projections not just for an individual but for a couple. The calculator asks about age, gender, smoking habits and general health. Then, it shows each partner’s chances of living to different ages: 80, 90, even 100.
That calculation is crucial in retirement planning, Mattia said, because your plan has to cover the partner who lives longer.
If you and your partner are 65 today, there’s an 8.7% chance one of you will live to 100, according to the Center for Retirement Research. If you are both 25, the odds rise to 15.7%.
Jeff Farrar, a certified financial planner in Shelton, Connecticut, writes retirement plans that cover a couple to age 94, based on the reasonable odds that one or the other will reach that age.
“Then I ask them about their parents,” he said. “Did Mom live to 100? What do they think their health is like? Better than average? Worse than average? Then that’s a sign there are good genes in the family, and maybe we should go even further out.”
This article originally appeared on USA TODAY: How long will you live? It's the X factor in retirement planning
