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Life Expectancy Differentials and Retirement Planning

retirement planning - longevity-margolis-bloom-dagostino

After decades of growth, according to the Center for Disease Control, life expectancy in the United States fell dramatically from 78 years in 2019 to 76.1 years in 2021. This was largely due to the effects of Covid-19. Yet, even before the pandemic life expectancy had already flattened out. Using somewhat different data, the United Nations finds that U.S. life expectancy increased from 68 years in 1950 to 79 years in 2014, and since then has fluctuated around that latter figure.

In their book, Deaths of Despair and the Future of Capitalism, Princeton economists Anne Case and Angus Deaton describe the hollowing out of the white middle-class since 2000 and its effect on individuals, families and communities. The result has been what they call “deaths of despair” as more and more white Americans die from suicide, drug overdoses and alcoholism. As a result, the life expectancy gap between whites and Blacks closed to some extent. While the life expectancy of white Americans grew a modest 1.7 years from 2000 to 2019, that of Black Americans grew 3.9 years.

Better to be Female . . .

Women have always lived longer than men, though the differential narrows the longer we live. At birth, the differential is almost six years with male babies in the United States having a life expectancy of just 73.5 years as compared to female babies who have a life expectancy of 79.3 years. For those who make it to age 65, the differential narrows to 2.7 years, with the men on average being able to expect to live another 17 years and women 19.7 more years. By age 90, the differential falls to less than a year, with average life expectancy of 3.7 years for men and 4.4 years for women, according to Social Security actuarial tables. However, there are almost twice as many female as male nonagenarians around. The Social Security Administration projects that out of 200,000 babies, approximately 14,000 boys and 25,000 girls will make it to age 90.

Live in Europe . . .

Life expectancy is often used as a proxy for quality of life. Unfortunately for Americans, the United States compares unfavorably with other developed nations. In 2019, the comparable country average life expectancy as compiled by the Organization for Economic Cooperation and Development (OECD) was 82.9 years as compared to 78.8 years in the United States. In 1980, the differential was much smaller with the comparable country average life expectancy at 74.5 years and the U.S. life expectancy at 73.7 years. In other words, the differential that was less than a year in 1980 has grown to more than four years.

And Be Wealthy

One large difference between the United States and other developed countries is the effect of wealth on life expectancy. The wealthiest Americans compare well with the European counterparts; poorer Americans do not. Americans in the top one percent of income distribution have much longer life expectancies than those in bottom one percent, 88.9 years for women as compared to 78.8 years and 87.3 years for high-income men as compared 72.7 years low-income men. Interestingly, the 10-year differential for women is not as large as the whopping 15-year differential for men. As a result, the life expectancy differential between men and women is much lower for those who are wealthy, just 2.5 years, than for those who are poor, 6.1 years.

Consistent with the “deaths of despair” scenario, according to an article in the Journal of the American Medical Association, wealthier Americans continued to increase their longevity during the early 2000s while those with fewer resources did not. From 2000 to 2014, men in the top quarter by income increasing their life expectancy by 0.2 years on average every year, while those in the bottom quartile increased theirs by only 0.08 years on average per year. For women, the statistics are comparable, 0.23 years as compared to 0.1 years.

While inequality has a greater effect on longevity in the United States than it does on comparable countries, it’s far from nonexistent in those nations. An OECD study finds that “the gap in life expectancy between high and low-educated people is equal to 8 years for men and 5 years for women at the age of 25 years; and 3.5 years for men and 2.5 years for women at the age of 65. Cardio-vascular diseases, the primary cause of death for the over 65s, are the primary cause of mortality inequality between the high and low-education elderly.” There’s a large range in the size of the gap among OECD countries, ranging from about four years for men at age 25 in Italy to 14 years in Hungary.

How Can We Use These Numbers?

So, what do all these numbers mean for you? Perhaps not too much since individual longevity depends on health, lifestyle, and genetics, as well as chance. Of course, it’s easier to plan the older we are since life expectancy shortens for everyone the older we get. And by the time we reach our older years, we have a lot of knowledge about how our own health, lifestyle, and genetics are baked in to our individual longevity, if not how our good or bad luck will affect both the quality and quantity of our later years.

But knowing the factors that play into longevity as well as averages across populations can help us plan. The fact that at age 65 American women on average live another 20 years, and men are not that far behind, means that any retirement plans must project out at least two decades. But those are just averages, which you can expand or contract depending on your health. And while on average only one in five men and one in three women who are 65 will make it to age 90, for a married couple there’s almost a 50 percent chance that one or the other will live into their 90s.

For my book, Get Your Ducks in a Row: The Baby Boomers Guide to Estate Planning, I crunched the numbers from the Social Security actuarial tables to calculate the average likelihood of dying in 10 years by age. (I know, this is a bit morbid.) Here’s the table beginning at age 60:

Likelihood Not to Live Out the Decade

AgeMalesFemales
At age 60, likelihood to die before age 7014.5% 9.5%
70 to 8031.5%26.9%
80 to 9065.4%54.8%
90 to 10094.9%90.9%
100 to 11099.8%99.5%
Of 100,000 babies, number who survive to 1102 13

Here’s a perhaps less morbid version of the same chart showing the likelihood of living rather than of dying within the coming decade, at least up until age 80:

Likelihood to Live Out the Decade

AgeMales Females
At age 60, likelihood to live to age 7085.5% 90.5%
70 to 8068.5%73.1%
80 to 9034.6%45.2%
90 to 1005.1%9.1%
100 to 1100.2%0.5%

Of course, all the numbers look better for women than for men. But whether you or male or female or married to someone who is male or female, these numbers should provide some perspective for financial planning.

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