Do you account for likely life expectancy in retirement?

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TheTimeLord
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Do you account for likely life expectancy in retirement?

Post by TheTimeLord »

My wife and I are DINKS. We have always made it a point to live below our means. In fact, we have pretty much always been able to live on just one of our incomes. While I plan to stop working in the next couple years my DW plans to work a bit longer and her salary would be sufficient to maintain our lifestyle without touching our savings. So by the time she plans to retire it seems unlikely that we would both if either would have a 30 year retirement. That said I know lots of people plan for retirements that will last long beyond their life expectancy and being caught in old age with no money or human capital is not a place you want to be. But how does your retirement planning change if your likely retirement is going to be 25 years instead of 30? Also, when I stop working should I consider myself retired if the DW is still earning enough to cover expenses? Seems like I am a stay at home spouse and not really retired.
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Erwin
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Re: Do you account for likely life expectancy in retirement?

Post by Erwin »

I come from a family of people that did not reach 80. When came time to consider when to begin SS benefits, I did not think twice about starting at 62. Further, my portfolio is most likely more conservative than most at my age, simply because I do not expect that my retirement would last 30 years.
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Re: Do you account for likely life expectancy in retirement?

Post by nisiprius »

"Do I account for likely life expectancy in retirement?"

Yes and no. I "account for life expectancy" by choosing to make use of income annuities (and Social Security).

For the rest of my planning, I "simply" accept that life expectancy is uncertain.

The shape of the mortality curve is a fairly long, broad slope. A 65-year-old in the US has about a 10% chance of having less than six years left; you can't ignore that. A 65-year-old also has 10% of living another 30 years, you can't ignore that, either. And quite a lot of women reach ages of over 100.

So you are talking about a factor of five uncertainty, or an uncertainty of 24 years, in how long you'll live. If you don't like my numbers, find the life table you think best fits your situation and choose the percentiles you think make sense to you, but it's still a huge uncertainty.

If you have black lung disease or multiple sclerosis or pancreatic cancer, and a doctor has told you that your life expectancy is limited, then you have reason to use a different planning number. Apart from that, all the online calculators that purport to tell you your average life expectancy if you eat right and keep fit are pretty much nonsense in terms of planning, because the big fact is the 24-year spread between "6 more years" and "30 more years," and it completely swamps little facts like "people who work out live an average of 2.6 years longer" or whatever. Such statistical averages may be very important for a government setting public policy, or for an insurance company writing life insurance, or motivation to exercise; but they are almost meaningless to an individual in terms of calculating numbers.

The same is true for "good genes." The Framingham heart study found that the correlation between parent and child mortality was very low, something like 7%. "I come from a long-lived family" or "Aunt Vera lived to 108" aren't really actionable planning information.

Unfortunately, there are a lot of throwaway conditional statements of the form "if you know you are likely to live longer, then you should..." The problem is that the first part of the statement never really applies--not strongly or reliably enough for an individual to use.
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Re: Do you account for likely life expectancy in retirement?

Post by RadAudit »

TheTimeLord wrote: But how does your retirement planning change if your likely retirement is going to be 25 years instead of 30? Also, when I stop working should I consider myself retired if the DW is still earning enough to cover expenses? Seems like I am a stay at home spouse and not really retired.
My retirement planning would not change for a span of 25 years instead on 30. That time span is just too small to predict possible outcomes accurately. The difference would be an end point for the DW of between 83 to 89. The low end of the range is cutting it a little too close for comfort considering she comes from a family of long lived folks.

By the way, stay at home spouses never retire.
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Re: Do you account for likely life expectancy in retirement?

Post by sschullo »

TheTimeLord wrote:My wife and I are DINKS. We have always made it a point to live below our means. In fact, we have pretty much always been able to live on just one of our incomes. While I plan to stop working in the next couple years my DW plans to work a bit longer and her salary would be sufficient to maintain our lifestyle without touching our savings. So by the time she plans to retire it seems unlikely that we would both if either would have a 30 year retirement. That said I know lots of people plan for retirements that will last long beyond their life expectancy and being caught in old age with no money or human capital is not a place you want to be. But how does your retirement planning change if your likely retirement is going to be 25 years instead of 30? Also, when I stop working should I consider myself retired if the DW is still earning enough to cover expenses? Seems like I am a stay at home spouse and not really retired.
Haven't heard the DINKS acronym for decades! :)

FWIW: Here is my perspective of coming from a family of long-lived parents: My husband's father lived to 90 in good health all the way to the end, and his mother is still alive at 97, and will probably live to 100. Yet, their son, my hubby, died at age 74 suddenly and shockingly from an aggressive form of leukemia (former marathon runner, ate fairly healthy and in good physical shape, great mental outlook and retired at 59). His brother is in terrible shape, overweight, a real couch potato and is still alive in his late 70s. My point is that from my perspective, it is fruitless to adjust your retirement planning by guessing how long you will live.
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Re: Do you account for likely life expectancy in retirement?

Post by Sheepdog »

Look out for that expected life expectancy. You may be surprised. I did not really expect to live too long or my wife either after retiring at 65 in 1998 for these reasons: All of my grandparents died before they were 65. My father died at 59. I had a heart attack 2 months before retiring. My sister died at 73.
On my wife's side her father died at 42 and her mother at 66.
Where are we now? I am near 84 and my wife is close to 77. While I expected 20 years ago to be pushing up the daises now, I am planting the daises instead. My update expectancy figure now? I don't know, but I am not pessimistic.
My recommendation? Plan for a long and happy retirement,well into your 90s, regardless of family history.
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Re: Do you account for likely life expectancy in retirement?

Post by Impromptu »

I do, but in a different way than many bogleheads. I am maintaining a permanent life insurance. Not recommended for most others.

When I was a teenager and invincible, I thought I would likely live to be 120 years old. As I have aged, I see that mortality is a real thing. I still have a hope to live to 120, so I am also saving at a rate that I think would last me for a long time, too.
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Re: Do you account for likely life expectancy in retirement?

Post by Cyclesafe »

I just convinced myself that my wife and I will live to 100. Why? It's a nice round number that hopefully I'll be able to subtract my age from even in my dotage to know how much time is left. If I die earlier, then I left assets on the table - so to speak.
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TheTimeLord
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Re: Do you account for likely life expectancy in retirement?

Post by TheTimeLord »

Sheepdog wrote:Look out for that expected life expectancy. You may be surprised. I did not really expect to live too long or my wife either after retiring at 65 in 1998 for these reasons: All of my grandparents died before they were 65. My father died at 59. I had a heart attack 2 months before retiring. My sister died at 73.
On my wife's side her father died at 42 and her mother at 66.
Where are we now? I am near 84 and my wife is close to 77. While I expected 20 years ago to be pushing up the daises now, I am planting the daises instead. My update expectancy figure now? I don't know, but I am not pessimistic.
My recommendation? Plan for a long and happy retirement,well into your 90s, regardless of family history.
That is the rub. The age I am assuming is longer than the average life expectancy but it is not something like 99. The spend over 25 years is 17% less than that over 30 years so we aren't talking round error.
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Re: Do you account for likely life expectancy in retirement?

Post by TheTimeLord »

Cyclesafe wrote:I just convinced myself that my wife and I will live to 100. Why? It's a nice round number that hopefully I'll be able to subtract my age from even in my dotage to know how much time is left. If I die earlier, then I left assets on the table - so to speak.
I am sure part of my issue is I expect that somewhere between 67-72 we will slow down significantly and if I don't have any chronic health issues and haven't become addicted to what is likely to be 5 minute delivery by Amazon Prime at that point, our expenses should drop.
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Re: Do you account for likely life expectancy in retirement?

Post by Sheepdog »

TheTimeLord wrote:
I am sure part of my issue is I expect that somewhere between 67-72 we will slow down significantly and if I don't have any chronic health issues and haven't become addicted to what is likely to be 5 minute delivery by Amazon Prime at that point, our expenses should drop.
Why do you expect to slow down between 67-72 and that your expenses should drop? That didn't happen to us. We traveled as much. We still bought our cars on our schedule (each one every 8 years)? We ate out more the older we got. We paid for more entertainment. We haven't had high cost chronic medical conditions....chronic somewhat, but not high cost. Neglecting income tax, which is negligible today, at my age 64 to 69 our annual spending averaged $57,898, at age 74 to 78 it was $66,406, and at my 78 to 83 it was $67,451. And, we didn't buythe latest electronic gadgets or had a bunch of grandkids or great grandkids to gift to either (wish we had though and if we did we certainly would have spent more..).
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Re: Do you account for likely life expectancy in retirement?

Post by Carefreeap »

Cyclesafe wrote:I just convinced myself that my wife and I will live to 100. Why? It's a nice round number that hopefully I'll be able to subtract my age from even in my dotage to know how much time is left. If I die earlier, then I left assets on the table - so to speak.
Lol, my planning logic as well. :wink:

Although to be fair, DH's grandfather lived to 102 (he was born in 1901). No one else in the family has lived anywhere near that long which goes to show you what a crapshoot estimating longevity is.
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Re: Do you account for likely life expectancy in retirement?

Post by bb »

Practically speaking I don't see how you can factor life expectancy
into retirement planning because it is something that will always
be unkown. If you had some certainty that you can withdraw
(x)% over a period of (y) years that would be one thing, but I don't
believe that is the case.
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Re: Do you account for likely life expectancy in retirement?

Post by bengal22 »

Since I plan on my portfolio to continue to grow(on average) over time.... life expectancy is not important to me. Other than I hope to shoot my age at golf when I am 100.
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Re: Do you account for likely life expectancy in retirement?

Post by TheTimeLord »

Sheepdog wrote:
TheTimeLord wrote:
I am sure part of my issue is I expect that somewhere between 67-72 we will slow down significantly and if I don't have any chronic health issues and haven't become addicted to what is likely to be 5 minute delivery by Amazon Prime at that point, our expenses should drop.
Why do you expect to slow down between 67-72 and that your expenses should drop? That didn't happen to us. We traveled as much. We still bought our cars on our schedule (each one every 8 years)? We ate out more the older we got. We paid for more entertainment. We haven't had high cost chronic medical conditions....chronic somewhat, but not high cost. Neglecting income tax, which is negligible today, at my age 64 to 69 our annual spending averaged $57,898, at age 74 to 78 it was $66,406, and at my 78 to 83 it was $67,451. And, we didn't buythe latest electronic gadgets or had a bunch of grandkids or great grandkids to gift to either (wish we had though and if we did we certainly would have spent more..).
Mainly observation. I just have yet to see anyone I know who traveled a fair amount before those ages keep up the pace. Its not that they don't travel but it may be 2 trips instead of 4 and a cruise instead of a safari. Unless I am totally misjudging myself I would expect golf trips to go from being a chance to play the best high end courses to a good excuse to get together with friends in Myrtle Beach. Everything I have seen and most of what I have read here with a couple notable exceptions shows people enjoying have additional downtime not picking up their suitcases and hitting the road. It just seems we humans mellow with age and men especially start becoming more of home bodies. Just to be clear I am saying that I expect to slowdown significantly from where I am today in my 50s sometime between 67 and 72. And if I do then my life style barring a chronic medical conditions will become less expensive until a point at which I start needing more care.
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Re: Do you account for likely life expectancy in retirement?

Post by TheTimeLord »

bengal22 wrote:Since I plan on my portfolio to continue to grow(on average) over time
Why? Are you planning a very low withdrawal rate because when you run simulations it seems many of the successful ones still include retrenchment.
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Re: Do you account for likely life expectancy in retirement?

Post by tetractys »

There's a lot of tension between time hoped for and paying for a future dream. I've distilled it down to a retirement age rather than whether or not I'll have the money. So for me saving as much as reasonably possible until that time is the priority, and not reaching a certain dollar amount. Part of this has to do with hoping to retire with enough functionality to accomplish more, something beautiful no matter how small. Today my work is divided into MY work and working to save. I view MY work as more important than gross physicality, so the money cushion is not the deciding factor.

And on the other side of the coin, should I pass away unexpectedly, the inheritors of my assets are set in place and up to date. -- Tet
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Re: Do you account for likely life expectancy in retirement?

Post by grandmacassie »

I'm using 100 as a planning tool, but also plan to give up all my good health habits starting at age 80. (ice cream parlors, here I come!) Based on observations of family, it is possible to live a long time with a poor (and extremely expensive) quality of life. I really don't want that.
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Re: Do you account for likely life expectancy in retirement?

Post by bengal22 »

TheTimeLord wrote:
bengal22 wrote:Since I plan on my portfolio to continue to grow(on average) over time
Why? Are you planning a very low withdrawal rate because when you run simulations it seems many of the successful ones still include retrenchment.
Once we start our SSA, that combined with a pension will put the gap between expenses and income fairly small. We still plan on good vacations and helping the grandkids but I still think the market(55/45 AA) plus inflow will outpace the market. We should be able to easily have fun on what our portfolio earns(plus income).
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Re: Do you account for likely life expectancy in retirement?

Post by btenny »

No one knows how long they will live. It is just unknown. You can plan for 100 and die at 55. Modern medicine says the numbers of us living longer will go up but the fact is that is statistics. A single person might die at 55 or live to 100.

I am planning on my wife or I making 100 for planning purposes but spending and enjoying life now.

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Re: Do you account for likely life expectancy in retirement?

Post by RudyS »

My 2 cents worth:

Wear your seat belts! Best way I know of to improve the odds in your favor. You may be a great driver, but you've seen how the other people drive!

:sharebeer but not soon after driving!
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Re: Do you account for likely life expectancy in retirement?

Post by corn18 »

I just have to reach 70. Once there, my COLA pension and SS more than covers my planned expenses. I plan to have a large nest egg when I hit 70 and that can cover LTC, maybe a Corvette and the left overs can go to the kids.
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Re: Do you account for likely life expectancy in retirement?

Post by GerryL »

My longest-lived grandparents died in their 70s. My parents both died around 86. Continuing the 10 years per generation, the figure I punch into retirement calculators is 96. But I'm hoping and planning to stay healthy -- both physically and fiscally -- longer than that.
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Re: Do you account for likely life expectancy in retirement?

Post by VictoriaF »

Retirement is a perfect time to improve your health. As a retiree, you don't commute, you avoid common stressors, you sleep as you please, you travel, you socialize, and of course you exercise. Thus an earlier retirement leads to a longer life, and a later retirement shortens the total lifespan. The earlier one retires the better it is for his longevity but worse for his finances. The finances, and not the health, put the low limit on one's retirement date.

I waited to retire until I became eligible for a Federal pension and Federal Employee Health Benefits (FEHB) in retirement. Now that I'm retired, I am delaying Social Security until the age of 70. The maximized Social Security, the Federal pension, and a pension from a previous private employer will cover my basic needs. I am satisfying my "premium needs" with my savings, which under normal circumstances will last beyond my current life expectancy. A great unknown is the advances in medicine that may substantially extend life expectancies. That would have a dual financial effect: more money will be needed for treatments not covered by insurance, and more money will be needed for a longer life. 150 years? 250 years? That may stretch my portfolio but I will deal with it as it happens.

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Re: Do you account for likely life expectancy in retirement?

Post by blueblock »

Pre-retirement, I spent a lot of time thinking about life expectancy: I have good "longevity genes," but I also have a congenital heart anomaly. To make a long story short, I settled on 85 as my drop dead date, just to have something reasonable to plug into the calculators. Maybe I'll die sooner (or on schedule, so to speak), in which case I'm all set. Or maybe I'll live into my nineties, in which case I may need to retrench at some point, depending on how my portfolio is doing, but that's easily accomplished with no real hardship.

As to your other question, I think you will be neither retired or a stay-at-home spouse. I think you will be a wealth management expert. :wink:
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Re: Do you account for likely life expectancy in retirement?

Post by Sandtrap »

Yes.
I told my wife very recently, "If I get an SPIA and we annuitize, it will force me to live longer to get my money's worth." :oops:
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Re: Do you account for likely life expectancy in retirement?

Post by freebeer »

VictoriaF wrote:Reti... an earlier retirement leads to a longer life, and a later retirement shortens the total lifespan.
Is there evidence supporting this contention?

Because, I always hear the opposite (early retirement => boredom => earlier death).
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Re: Do you account for likely life expectancy in retirement?

Post by tennisplyr »

I'm 67 and guesstimate I have ~20 years to go for planning purposes. Fewer years is good for my portfolio, more years is good for me. :happy
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Re: Do you account for likely life expectancy in retirement?

Post by Mike Scott »

Based on family history, at least one of the two of us has a good chance of living to 100+. But then we might not either.
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Re: Do you account for likely life expectancy in retirement?

Post by VictoriaF »

freebeer wrote:
VictoriaF wrote:an earlier retirement leads to a longer life, and a later retirement shortens the total lifespan.
Is there evidence supporting this contention?

Because, I always hear the opposite (early retirement => boredom => earlier death).
I have no evidence apart from one-person experience and pure logic. As a retiree, I am more active, less stressed, and enjoy life more. I am certain that each day in retirement is prolonging my life.

I saw some references to people dying in early retirement, but I can't think of a systemic explanation and attribute it to special cases. Perhaps, these people were forced to retire and kill themselves with stress about the unfairness? Perhaps, people retired because they were already ill and could not work? Perhaps, people hate their spouses and in retirement are forced to face them around the clock? Otherwise, I just can't see any reason for not having an active and rewarding life in retirement.

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Re: Do you account for likely life expectancy in retirement?

Post by AlohaJoe »

Sheepdog wrote:
TheTimeLord wrote:
I am sure part of my issue is I expect that somewhere between 67-72 we will slow down significantly and if I don't have any chronic health issues and haven't become addicted to what is likely to be 5 minute delivery by Amazon Prime at that point, our expenses should drop.
Why do you expect to slow down between 67-72 and that your expenses should drop? That didn't happen to us. We traveled as much. We still bought our cars on our schedule (each one every 8 years)? We ate out more the older we got. We paid for more entertainment. We haven't had high cost chronic medical conditions....chronic somewhat, but not high cost. Neglecting income tax, which is negligible today, at my age 64 to 69 our annual spending averaged $57,898, at age 74 to 78 it was $66,406, and at my 78 to 83 it was $67,451. And, we didn't buythe latest electronic gadgets or had a bunch of grandkids or great grandkids to gift to either (wish we had though and if we did we certainly would have spent more..).
When people talk about their expenses going down in retirement, the only meaningful comparison are inflation-adjusted expenses.

In 1996, when you were 64, you spent $57,898.

Adjusting for inflation means you should have spent $88,565 last year in order to not decrease spending.

You say you actually spent $67,451, a decrease of over $20,000 of nearly 24% over 20 years.

It seems like your personal experience supports TheTimeLord's expectation about expenses decreasing.
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Re: Do you account for likely life expectancy in retirement?

Post by TigerNest »

I plan to purchase an annuity at age 80 or 85 to cover all comfortable expenses (when added to social security). I can't have much actuarial life left at that point, but it should provide comfort and safety if I an blessed enough to be in the long tail.
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Re: Do you account for likely life expectancy in retirement?

Post by Quark »

TheTimeLord wrote:That is the rub. The age I am assuming is longer than the average life expectancy but it is not something like 99. The spend over 25 years is 17% less than that over 30 years so we aren't talking round error.
Which would make you feel worse, being dead when you could have spent more or being rather old and not having enough money?
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Re: Do you account for likely life expectancy in retirement?

Post by WildBill »

1- Pick a financial organization that you absolutely hate.

2- Buy a SPIA from them.

3 - Dig in and keep yourself healthy and hang on and on and on, just to keep the payments coming and making those SOBs suffer.

4 - Before going to sleep every night, consider the SPIA, smile, roll over and sleep the sleep of the just.

:sharebeer

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Re: Do you account for likely life expectancy in retirement?

Post by curmudgeon »

TheTimeLord wrote: I am sure part of my issue is I expect that somewhere between 67-72 we will slow down significantly and if I don't have any chronic health issues and haven't become addicted to what is likely to be 5 minute delivery by Amazon Prime at that point, our expenses should drop.
Mainly observation. I just have yet to see anyone I know who traveled a fair amount before those ages keep up the pace. Its not that they don't travel but it may be 2 trips instead of 4 and a cruise instead of a safari. Unless I am totally misjudging myself I would expect golf trips to go from being a chance to play the best high end courses to a good excuse to get together with friends in Myrtle Beach. Everything I have seen and most of what I have read here with a couple notable exceptions shows people enjoying have additional downtime not picking up their suitcases and hitting the road. It just seems we humans mellow with age and men especially start becoming more of home bodies.

Just to be clear I am saying that I expect to slowdown significantly from where I am today in my 50s sometime between 67 and 72. And if I do then my life style barring a chronic medical conditions will become less expensive until a point at which I start needing more care.
I have some acquaintances in their late 80's who just plunked down $200K for a luxury round-the-world cruise. Third one of that type in the last six years. They have indeed slowed down a lot physically, don't like to fly or drive much, but have kept the spending up (or increased) in this way. On the other hand, I don't think they would feel deprived if they didn't have money for these trips; it's more that the money is there and they would rather spend it than leave it.
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Re: Do you account for likely life expectancy in retirement?

Post by celia »

I think you should plan for "the worst" (living past 100) then be happy it didn't happen to you. That's what we do with homeowners/fire insurance, isn't it?

If you do make it to 100, then be happy you did (make it to 100).
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The Wizard
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Re: Do you account for likely life expectancy in retirement?

Post by The Wizard »

bengal22 wrote:Since I plan on my portfolio to continue to grow(on average) over time.... life expectancy is not important to me. Other than I hope to shoot my age at golf when I am 100.
I think this may happen to me also, the portfolio growth part, not the golf part. :)

I'm trying not to be overconfident, but I've had overall growth in my portfolio these first four years of retirement even as I withdraw funds from it in lieu of SS. When I start full SS in three years at 70, my portfolio withdrawals might likely get reinvested in my taxable account rather than being mostly spent as they are now.

I think the concept of living beneath your means for several decades of employment doesn't suddenly change when you retire...
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Levett
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Re: Do you account for likely life expectancy in retirement?

Post by Levett »

I happen to agree entirely with Nisi.

Given the uncertainty of life (first wife died in her late 30s), I decided to retire early as soon as the kids were finished with college.

I listened to Satchel Paige: "Don't look back. Something might be gaining on you."

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Sandtrap
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Re: Do you account for likely life expectancy in retirement?

Post by Sandtrap »

"Quality of Life" is like inflation to the dollar.
It eats at aging long before life expectancy becomes hard reality.

The "elephant in the room" dwindles a portfolio. Surgeries, life issues, family drama, etc.
Perhaps, some would call them "black swan events".
Thus, long term care insurance, SPIA's, etc.?
If true. . . what are the solutions or remedies?
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SGM
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Re: Do you account for likely life expectancy in retirement?

Post by SGM »

I account for longevity of DW in retirement. Although there may not be a high correlation between parental age at death and the child's she is healthy and both parents lived to be over 100. We can afford good health care, don't smoke and wear seat belts.

A few steps that are associated with planning for her longer life expectancy include having a joint lifetime payout of a work pension another is delaying my SS until age 70. In the future I expect to buy a ladder of SPIAs. Withdrawal rate from portfolio is pretty low due to multiple income streams.

Roth IRAs will grow untaxed and untouched for a long time. We do have a desire to leave money to the children, but they are already set if they do not do anything foolish with what they already have and continue to work.

DW would not benefit from an increase in basis from a joint account as much as she would from me having an individual account. That shows a lack of planning for her greater likelihood of increased longevity. So I guess I will just have to live that much longer so that I don't look foolish in only using a joint taxable account.
TN_Boy
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Re: Do you account for likely life expectancy in retirement?

Post by TN_Boy »

TheTimeLord wrote:My wife and I are DINKS. We have always made it a point to live below our means. In fact, we have pretty much always been able to live on just one of our incomes. While I plan to stop working in the next couple years my DW plans to work a bit longer and her salary would be sufficient to maintain our lifestyle without touching our savings. So by the time she plans to retire it seems unlikely that we would both if either would have a 30 year retirement. That said I know lots of people plan for retirements that will last long beyond their life expectancy and being caught in old age with no money or human capital is not a place you want to be. But how does your retirement planning change if your likely retirement is going to be 25 years instead of 30? Also, when I stop working should I consider myself retired if the DW is still earning enough to cover expenses? Seems like I am a stay at home spouse and not really retired.
From a definition standpoint, if I stop working, *I'm* retired even if the spouse is still working :happy. The working spouse just means the demands on the retirement savings are less/deferred.

+1 to the posts that point out statistics and family history tell you next to nothing about how long you and your spouse will live. That said, if I was retiring at say 60, I'd assume a roughly 30 year retirement, and try to reassure myself that if it was 40 years, I'd be in reasonable shape.

I'd also expect expenses to generally decline as I hit my 70s. There are exceptions, but that pattern is consistent with what I've seen from relatives and is also consistent with research. Yes, medical disasters could change that.

One thing I would do is think about how things play out if one spouse outlives the other by a number of years. For example, I'd probably want any pensions to be 100% survivor if possible (even if the younger spouse had the pension). Taxes on one person will be higher than on two, so that's a potential consideration.

An obvious problem is if one spouse requires assisted living/skilled care for a long time and the other does not (so the healthier spouse will still be living in a house, etc). This is a harder problem than if one dies early.
Caduceus
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Re: Do you account for likely life expectancy in retirement?

Post by Caduceus »

Apart from the Monte Carlo simulation or 4% rule-of-thumb safe withdrawal rules, another way of calculating how much you need is to come out with an inflation-adjusted figure for each year you expect to live, and then discount it by some reasonable rate (e.g. TIPS rate of return for each horizon)

Even if you expect to live till 100, this discounted calculation will probably be smaller than what a Monte Carlo simulation would suggest.

So, yes, taking into account life expectancy, especially if you don't have bequest motives, is quite reasonable.
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Flobes
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Re: Do you account for likely life expectancy in retirement?

Post by Flobes »

Erwin wrote:I come from a family of people that did not reach 80. When came time to consider when to begin SS benefits, I did not think twice about starting at 62.
None of my family made it to 80 either: not my parents nor any of my grandparents. Yet I'm planning to wait 'til 70 to collect SS. Who knows? My life and lifestyle are very different from theirs. If I am first in family to win the longevity lottery, I sure don't want to live it as a miserly baglady.

My family mortality history did factor into my decision about long-term care insurance. Each lived fully until suddenly felled by a major health episode. There's not a day of nursing home stay among my six, and so I opted out. I have ample assets to self-fund, if necessary.
Capsu78
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Re: Do you account for likely life expectancy in retirement?

Post by Capsu78 »

"Also, when I stop working should I consider myself retired if the DW is still earning enough to cover expenses? Seems like I am a stay at home spouse and not really retired."

This is exactly where we are at- I retired at 57 and my 2 year younger wife continues to work. I use the term "Pretired", which gets some laughs, but is the best description for us. We still are in the accumulation phase and will continue to be for the next 3 to 5 years...or the next "bad Monday", whichever comes first.

I have a timeline countdown I adjust every month (for fun mostly) that tabletops how many investment $$$ it would cost for my wife to join me in "retirement", at which time we would consider it actual retirement. Psychologically we are not quite ready for a 24/7/365 relationship...she already has heard all my jokes and stories and she has no intention of listening to them again. She also has about 100 reports at work and I have warned her I can't possibly replace all the butt kissing she enjoys on a daily basis.

Practically, I view "pretirement" as the period between now and when she decides her job is no longer fun. We have no master timing plan but she knows she has the economic freedom to not have to suffer any more fools than she chooses too.
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nedsaid
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Re: Do you account for likely life expectancy in retirement?

Post by nedsaid »

Sheepdog wrote:Look out for that expected life expectancy. You may be surprised. I did not really expect to live too long or my wife either after retiring at 65 in 1998 for these reasons: All of my grandparents died before they were 65. My father died at 59. I had a heart attack 2 months before retiring. My sister died at 73.
On my wife's side her father died at 42 and her mother at 66.
Where are we now? I am near 84 and my wife is close to 77. While I expected 20 years ago to be pushing up the daises now, I am planting the daises instead. My update expectancy figure now? I don't know, but I am not pessimistic.
My recommendation? Plan for a long and happy retirement,well into your 90s, regardless of family history.
This is an excellent post. I think of my own parents, who are still living. Dad had a big heart attack at age 45, another cardiac event at age 57, a quadruple by-pass at age 68, cardiac arrest (pacemaker to fix) at age 79, and is still around at age 87. Mom is 84.
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Re: Do you account for likely life expectancy in retirement?

Post by itstoomuch »

We bought very expensive (for many BH) deferred GLWB annuities. Long Straddle. One of us is gonna be a winner. Annuity companies are losing on their assumptions on their contracts they sold (we bought). :mrgreen: :annoyed
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mak1277
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Re: Do you account for likely life expectancy in retirement?

Post by mak1277 »

TheTimeLord wrote:Also, when I stop working should I consider myself retired if the DW is still earning enough to cover expenses? Seems like I am a stay at home spouse and not really retired.

I think it's hard to say "retired" if one half of a married couple **needs** to work in order to cover expenses. If you're financially independent and your wife chooses to work, I think you can certainly call yourself retired.

In reality though...who cares? My wife isn't yet 40 but is currently taking her second hiatus from the work force. She laughs when people ask her what she does and says she's retired and does whatever she wants.
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TheTimeLord
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Re: Do you account for likely life expectancy in retirement?

Post by TheTimeLord »

Quark wrote:
TheTimeLord wrote:That is the rub. The age I am assuming is longer than the average life expectancy but it is not something like 99. The spend over 25 years is 17% less than that over 30 years so we aren't talking round error.
Which would make you feel worse, being dead when you could have spent more or being rather old and not having enough money?
Then I should plan for 120?
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TheTimeLord
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Re: Do you account for likely life expectancy in retirement?

Post by TheTimeLord »

curmudgeon wrote:
TheTimeLord wrote: I am sure part of my issue is I expect that somewhere between 67-72 we will slow down significantly and if I don't have any chronic health issues and haven't become addicted to what is likely to be 5 minute delivery by Amazon Prime at that point, our expenses should drop.
Mainly observation. I just have yet to see anyone I know who traveled a fair amount before those ages keep up the pace. Its not that they don't travel but it may be 2 trips instead of 4 and a cruise instead of a safari. Unless I am totally misjudging myself I would expect golf trips to go from being a chance to play the best high end courses to a good excuse to get together with friends in Myrtle Beach. Everything I have seen and most of what I have read here with a couple notable exceptions shows people enjoying have additional downtime not picking up their suitcases and hitting the road. It just seems we humans mellow with age and men especially start becoming more of home bodies.

Just to be clear I am saying that I expect to slowdown significantly from where I am today in my 50s sometime between 67 and 72. And if I do then my life style barring a chronic medical conditions will become less expensive until a point at which I start needing more care.
I have some acquaintances in their late 80's who just plunked down $200K for a luxury round-the-world cruise. Third one of that type in the last six years. They have indeed slowed down a lot physically, don't like to fly or drive much, but have kept the spending up (or increased) in this way. On the other hand, I don't think they would feel deprived if they didn't have money for these trips; it's more that the money is there and they would rather spend it than leave it.
If they are spending $200K on 6 month cruise, what did they spend before when they didn't mind catching a First Class 12 hour flight? Normally active vacations cost more than passive but if you up the luxury of you travel or accommodations you can certainly increase the costs.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
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