I’m a survival pessimist. Both my parents died around age 70. I am a breast cancer survivor (first diagnosed in 2013). I’m age 69 and would be surprised if I live another 10 years. On the other hand, I work out almost every day and one of my cousins has survived breast cancer for at least 25 years. So I could surprise myself and live till 90, like my mother’s older sister.
Apparently, survival pessimism is a thing. If I knew exactly how long I had to live I could plan my investments and expenses to be exactly zero on my date of death. But obviously I don’t so I have to be thrifty to avoid outliving my investments. DH and I both have long-term care insurance but that’s only partial coverage for the potential slings and arrows of outrageous fortune.
You Might Live Longer Than You Think. Your Finances Might Not.
Financial planning tends to overlook longevity, a factor that can far exceed life expectancy
By Josh Zumbrun, The Wall Street Journal, Updated Feb. 10, 2023
The good news is that many Americans live a lot longer than they expect. The bad news is that this often leads to financial regret as they realize, sometimes too late, they might have claimed Social Security too early, passed up the opportunity to buy annuities or long-term-care insurance, or simply undersaved for all those added years of retirement…
What matters for most people is the life expectancy and longevity risk of their specific age group going forward. (If you’re 65, the death rates of people ages 0 to 64 are no longer part of your calculation.)…
In the Michigan State University Health and Retirement Study people systematically understated their chances of living to 75 by 10% or more. For example, one year the 65-year-olds gave themselves a 67% chance of living 10 more years, but 78% were still around to take the survey 10 years later. Cormac O’Dea of Yale University and David Sturrock of University College London in a recent paper call this phenomenon “survival pessimism.”…[end quote]
Both the Social Security Administration and the IRS have life expectancy tables. The National Academy of Sciences found large longevity gaps based on income. Among men born in 1960, those in the top income quintile could expect to live 12.7 years longer at age 50 than men in the bottom income quintile. This NAS study finds similar patterns for women: the life expectancy gap at age 50 between the bottom and top income quintiles of women was 13.6 years for the 1960 birth cohort.
Also see Life Expectancy for CP, VS, TBI and SCI
The WSJ article points out that many tables report an average life expectancy. Longevity risk is different – it’s the probability of living to a much older age than average. A man in excellent health born in 1950 has a median life expectancy of 88, but a 25% chance of living until 94 and a 10% chance of living until 98.