Retirement planning and longer lifespans

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garlandwhizzer
Posts: 1982
Joined: Fri Aug 06, 2010 3:42 pm

Retirement planning and longer lifespans

Post by garlandwhizzer » Wed Dec 31, 2014 12:24 pm

From a Vanguard website article posted today:
According to one study by the Society of Actuaries, there is roughly a 50% chance at least one partner of a male/female couple who are age 65 today will be alive at age 93. For unmarried individuals, a 65-year-old man has a better-than-50% chance of living to age 86, and a 65-year-old woman has a roughly 50% chance of living to age 89. And actuaries expect these numbers will continue to rise.
Vanguard warns that too conservative a retirement portfolio holding very few equities may present long term risks in view of increasing longevity. Also suggests consideration of annuities at some point. Perhaps 30 years of retirement funds, the usual financial portfolio planning scenario, will not always be sufficient for our future needs. We seem stuck in a time period when future investment returns appear to be lower than historical averages and yet with longer lifespans, our needs appear to be greater. Not exactly a happy New Year's message but perhaps one we need to consider seriously.

Garland Whizzer

chaz
Posts: 13601
Joined: Tue Feb 27, 2007 2:44 pm

Re: Retirement planning and longer lifespans

Post by chaz » Wed Dec 31, 2014 12:26 pm

Happy New Year. :)
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page

Zephyr120
Posts: 34
Joined: Fri Jan 27, 2012 11:25 pm

Re: Retirement planning and longer lifespans

Post by Zephyr120 » Wed Dec 31, 2014 12:57 pm

Why is the criteria 50%? Why not 20% or 3%? They're just playing with numbers rather than making decisions for someone's life.

flyingaway
Posts: 1890
Joined: Fri Jan 17, 2014 10:19 am

Re: Retirement planning and longer lifespans

Post by flyingaway » Wed Dec 31, 2014 1:11 pm

Just work and save, and quit when you don't want to work.

dhodson
Posts: 4117
Joined: Mon May 24, 2010 3:03 pm

Re: Retirement planning and longer lifespans

Post by dhodson » Wed Dec 31, 2014 1:15 pm

The funny thing about the annuity suggestion is that those products are based on the insurance company making correct assumptions including longevity.

Sidney
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Re: Retirement planning and longer lifespans

Post by Sidney » Wed Dec 31, 2014 1:17 pm

flyingaway wrote:Just work and save, and quit when you don't want to work.
Right. And if you run out of money, roll your wheel chair off a cliff.
I always wanted to be a procrastinator.

chaz
Posts: 13601
Joined: Tue Feb 27, 2007 2:44 pm

Re: Retirement planning and longer lifespans

Post by chaz » Wed Dec 31, 2014 1:18 pm

flyingaway wrote:Just work and save, and quit when you don't want to work.
That's what I did.
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page

chaz
Posts: 13601
Joined: Tue Feb 27, 2007 2:44 pm

Re: Retirement planning and longer lifespans

Post by chaz » Wed Dec 31, 2014 1:21 pm

Sidney wrote:
flyingaway wrote:Just work and save, and quit when you don't want to work.
Right. And if you run out of money, roll your wheel chair off a cliff.
I will not run out of money.
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page

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cfs
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Re: Retirement planning and longer lifespans

Post by cfs » Wed Dec 31, 2014 1:30 pm

garlandwhizzer wrote: . . . Vanguard warns that too conservative a retirement portfolio holding very few equities may present long term risks in view of increasing longevity . . .
Thanks shipmate GW, very few equities is not an issue if you don't depend on your investments for a living and to pay all your bills, for example a retired couple with a two checks coming from cola adjusted pensions and two checks coming from social security and using their whole retirement portfolio as a real emergency fund, in this case I see no issues with this retired couple having 100 percent of their portfolio in the LifeStrategy Income of Target Retirement Income funds. Just my unqualified point of view.
~ Member of the Active Retired Force since 2014 ~

robertf57
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Joined: Thu Jun 19, 2014 2:01 pm

Re: Retirement planning and longer lifespans

Post by robertf57 » Wed Dec 31, 2014 1:58 pm

cfs wrote:
garlandwhizzer wrote: . . . Vanguard warns that too conservative a retirement portfolio holding very few equities may present long term risks in view of increasing longevity . . .
Thanks shipmate GW, very few equities is not an issue if you don't depend on your investments for a living and to pay all your bills, for example a retired couple with a two checks coming from cola adjusted pensions and two checks coming from social security and using their whole retirement portfolio as a real emergency fund, in this case I see no issues with this retired couple having 100 percent of their portfolio in the LifeStrategy Income of Target Retirement Income funds. Just my unqualified point of view.

:greedy A person in the circumstance you describe doesn't need ANY investments. They aren't living off their portfolio. Unfortunately almost nobody is in that situation. In fact, I would venture to say two cola adjusted pensions of significant size is as rare as hen's teeth.

MathWizard
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Re: Retirement planning and longer lifespans

Post by MathWizard » Wed Dec 31, 2014 2:37 pm

I use the SS actuarial table at:
Using that, I see for a husband and wife both age 65,
There are 80,729 men and 88,081 women each out of an initial 100,000 that reach that age.
Using that as the initial population, and going down to age 93, we see then that on average
9,214 of those men and 17,798 of those women reach 93.

This means the odds are:
9214/80729*100% = 11.41% for the 65 year old man to make it to 93, and
17798/88081*100% = 20.21% for the 65 year old woman to make it to 93.

If we assume that these figures are independent, (the man dying does not have affect on the longevity of the wife and vice-versa),
then these probabilities just add to give
odds of at least one surviving to age 93 = 31.62%
the odds of both surviving is the product of the two, which is a much smaller 2.31%

Going to age 95 (30 years which is what is often cited for the 4% rule of thumb) the figures are
at least one survives to 95: 19.95%
both survive to 95: 0.89%

In either case, note that there is a reasonable probability (about 1 in 5) of at least one of the partners living 30 years, but the last
so many years will be with a single SS benefit check (the higher of the two). I take this into account when
I plan retirement income.

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