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RETIREMENT PLANNING

Life expectancy and retirement planning

Don't count on heredity when guessing how long you'll live

Published: June 25, 2015 05:00 PM

The clue many of us use to forecast our life expectancy is family history. If you’re still healthy and your parents got past 85, it seems reasonable to expect that you’ll reach that milestone too—barring an encounter with a moving bus. About half of Americans consider family history first when estimating their own life expectancy, says a survey by the Society of Actuaries.

Yet research shows that heredity plays a smaller role in how long you live than most people think. Determining a life span is a complex and inexact science. Understanding what contributes to your life expectancy could help you plan for what lies ahead.

But it may be only part of the equation in addressing your future financial needs.

Genes not necessarily the key

Financial planners say that they talk with their clients about family history when plotting a retirement time horizon. Yet research hasn’t shown a huge correlation between genes and life span before age 60. A 2006 Scandinavian study of twins found that most identical pairs died a decade or more apart, in spite of their shared genes. This and similar studies asserted that as little as about a quarter of one’s longevity is connected to inherited traits. (On the other hand, notes Jay Olshansky, a professor of epidemiology and biostatistics at the University of Illinois School of Public Health, “for those carrying lethal genes, it’s 100 percent genetic.”)

A 2013 study in the journal Experimental Gerontology did show that when one parent lives to 100, his or her offspring show less risk of developing certain age-related ailments compared with children of shorter-lived parents. They’re also less likely to need drugs to treat medical problems than other people. The paper confirmed that the genetic influence on aging was more evident at advanced ages. But those without very old ancestors may not be able to extrapolate from this about their own longevity.

What’s more, when some relatives live long and others don’t, “it’s hard for people to draw conclusions,” says Cindy Levering, an associate at the Society of Actuaries in Washington, D.C. Actuaries in the business of forecasting how long individuals will live don’t place as much emphasis on heredity.

Consumer Reports Retirement Planning Guide offers unbiased, expert advice on planning for your next chapter in life.

Life expectancy and lifestyle

Your life expectancy, it turns out, has a lot to do with lifestyle. A family history of heart disease correlates with a higher risk of early mortality, but new medications can lessen its likelihood. High blood pressure can be inherited, but it can also be addressed with medications. Exercise and a healthy diet are also associated with longer lives. Smoking—well, you can fill in the rest.

“Long life begins with genetics, but it can be modulated through lifestyle,” Olshansky says. “The only control we have over our duration of time is to shorten it, and we exercise that control all the time.”

Thanks to the mathematics-based rules of probability, we do know that couples are likely to live longer than those who live alone.

Use caution with calculators

If you insist on a definitive age on which to hang your plans, you could check out Northwestern Mutual Life Insurance Company's Lifespan Calculator, which attempts to show how factors including lifestyle choices can affect your expected age of death. But don't view the results as gospel. The calculator asks about family cardiovascular history, for instance, but notes that it may not provide accurate results for individuals who have a chronic illness. 

Still, if you want to focus on a number from a life expectancy calculator, add five to 10 years to any result you find, Levering says. “People expect they’re going to live a shorter period than they really do,” she says. 

Explore your options

Rather than focusing on how long you’re going to live, consider financial solutions that work regardless of life span. Webb, the economist, says he’s partial to annuities because they provide a steady stream of income for life. Traditional pensions are annuities; so is Social Security. Variable annuities have earned a bad reputation for their high up-front costs and questionable returns. But immediate annuities—which pay out right away on an up-front investment— and deferred annuities, particularly new “longevity annuities,” might be appropriate for folks concerned about outliving their funds. (No wonder Northwestern Mutual, which sells such products, got into offering longevity predictions.)

Harold Evensky, a certified financial planner and principal of the Coral Gables, Fla., financial-planning company Evensky and Katz, has had a change of heart about immediate annuities, which have become less costly: “The critical question is, ‘Is the company going to be around to pay me?’ ” Evensky says that early retirees in their late 50s and early 60s should focus on getting the best total return from their taxable and tax-deferred accounts. As they get older they might consider a longevity annuity, and near 70, they can begin to consider an immediate annuity. “People need to think of these as risk-management tools, not investments,” he says. “You’re insuring against living longer than you expect.”

Delay Social Security claims

There’s one element on which experts agree: Delaying Social Security claims is a great hedge against outliving your money. Each year past your full retirement age that you delay taking benefits you’ll increase your eventual monthly benefit by a handsome 8 percent, with inflation adjustments. that kind of guaranteed, risk-free rate of return isn’t currently available with other investments. And those payments continue for your lifetime.

Evensky and Webb both discount the argument some people raise that waiting to claim Social Security only pays off  if you are able to reach the break-even age of 82. The focus, they say, should be on using Social Security as it was originally intended, as insurance. “People have a home and fire insurance, but they don’t get upset when the house doesn’t burn down,” Evensky says. “You may die and not collect, but if you live it’ll be pretty important income.”

—Tobie Stanger (@TobieStanger on Twitter)


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