My Medicare Matters® is sponsored by National Council on Aging (NCOA). It’s designed to make it easier to make informed and confident choices about Medicare coverage, offering 1) general as well as personalized Medicare education and decision support, including estimated costs, and 2) the opportunity to connect with a trusted Medicare agency that meets NCOA’s Standards of Excellence for plan recommendations and enrollment.
Annuity.org has been providing visitors with carefully researched, timely information about annuities and structured settlements for nearly a decade. This free, comprehensive web resource offers professional insight from experienced financial experts on a variety of financial topics to help you make smart decisions about your money.
Wade Pfau, Ph.D., CFA, RICP® is the founder of Retirement Research. Wade is the Professor of Retirement Income at The American College of Financial Services. Wade earned a PH.D. in economics from Princeton University in 2003 with a dissertation about Social Security reform. Wade Pfau’s book, Reverse Mortgages: How to Use Reverse Mortgages to Secure Your Retirement, shows how reverse mortgages, when used correctly, can provide an added layer of security for retirees and allow them to enjoy retirement more by gaining liquidity from an illiquid asset.
All Reverse Mortgage Blog
Michael Branson, the CEO of All Reverse Mortgage, is the author of an excellent blog about reverse mortgages. Some of Michael’s posts include: “Reverse Mortgage After Death: What Heirs & Family Must Know,” “Warning: Reverse Mortgage Downsides & Disadvantages,” and “Reverse Mortgage Insurance Explained.”
PayingforSeniorCare.com strives to be the most complete, up-to-date, and reliable source of simple and easy-to-access information about financial resources for seniors and their loved ones on the internet. Financial products like reverse mortgages aid tens of thousands of retired Americans in paying out-of-pocket healthcare costs and other retirement expenses, and more than 24,000 FHA-secured reverse mortgage were closed in 2019.
The Association for Long Term Care Planning provides the latest reviews and ratings of insurers and has a list of shopping tips when buying a long-term care policy that can help consumers make a well-informed decision.
You can’t do retirement income planning without considering life expectancy. Many individuals use this statistical measure as the primary factor for deciding when they will begin taking their Social Security benefits as well as for determining the duration of their retirement plan.
Life Expectancies are Averages
What many people either fail to realize or downplay is the fact that life expectancies are statistical averages based on the probability of dying at various ages. To illustrate this, let’s look at the 2014 Period Life Table that can be found on Social Security’s website. The table lists death probabilities and life expectancies for males and females at various ages ranging from 0 to 119.
Per the table, the life expectancy for a 66-year-old is 17.12 for males and 19.63 for females. This translates to an average end-of-life age 83 for males and 86 for females. In other words, 50% of males who reach age 66 are projected to die before age 83 and 50% are projected to die after 83. The same probabilities apply to females, with 50% projected to die before age 86 and 50% after 86.
Assuming that you’re a 66-year-old male in good health, why would you plan on living only 17 more years? Do you want to live out your remaining days believing that 80% of your life is behind you and you only have another 20% to go? That’s what you’re doing when you use life expectancy.
When Are We Dying?
To better understand when people are dying, I analyzed Table 3 of the Centers for Disease Control and Prevention National Center for Health Statistics National Vital Statistics Reports for 2014, the most recent year for which the report was published. The following is an excerpt from the table showing the number of males and females in various age brackets beginning at 65 – 69 who died in 2014.
|65 – 69||129,802||14.5%||93,032||9.0%||222,834||11.6%|
|70 – 74||138,846||15.5%||109,861||10.7%||248,707||12.9%|
|75 – 79||149,259||16.7%||132,813||12.9%||282,072||14.7%|
|80 – 84||167,171||18.7%||175,261||17.0%||342,432||17.8%|
|85 and over||308,785||34.5%||517,441||50.3%||826,226||43.0%|
|Total Deaths for All Ages||1,328,241||1,298,177||2,626,418|
|Ages 65+ as a % of Total||67.3%||79.2%||73.2%|
Per the table, 1.9 million, or 73.2% of the 2.6 million individuals who died in 2014 were 65 or older. 60.8% of this group died when they were 80 or older, with 43% dying after age 84. 1.0 million, or 79.2% of the 1.3 million females who died in 2014 were 65 or older. 67.3% of the female group died when they were 80 or older, with 50.3% dying after age 84. Males weren’t quite as fortunate. 900,000, or 67.3% of them died when they were 65 or older. 53.2% made it to 80 or older, with 34.5% surviving to 85 and over.
Planning Implications of Using Life Expectancy
The primary planning implication of using life expectancy as the basis for all of your retirement planning decisions is that there’s a 50% chance that you’re projected to outlive your assets. A recent New York Times article featured a 90-year-old woman, Alice Jacobs, who was once well off, owning a factory and horses.
As a result of years of living in an assisted living center, Alice depleted her savings and is now dependent on Medicaid to pay for her care at a county-owned nursing home in Virginia. Alice’s quote says it all, “You think you’ve got enough money to last all your life, and here I am.”
Unfortunately, Alice’s situation isn’t isolated. As the article points out, Medicaid pays for most of the 1.4 million people in nursing homes, covering 20 percent of all Americans and 40 percent of poor adults.
Given the reality of outliving one’s assets, longevity protection strategies should be considered for inclusion in every retirement income plan. Pre-retirees and retirees alike whose plans include predictable lifetime income are more confident about their ability to retire and remain retired than those who don’t.
What about Genetics?
What role does genetics play in determining how long you will live? Aren’t you destined to get the diseases that run in your family? More and more research is showing that genetic determinism, which many scientific thinkers espoused in the 19th and early 20th century, is limited in predicting and preventing disease.
A relatively new field, epigenetics, is demonstrating that environment, not genetics, is the primary factor in controlling human health and disease. In his article, “Why Your Genes Aren’t Your Destiny,” Chris Kresser makes the point that while genes have a powerful influence on our susceptibility to disease, “in most cases, genetic predispositions will only manifest in the presence of certain environmental factors.”
Epigenetics has demonstrated that genes don’t control themselves. In his article, “Why Your DNA Isn’t Your Destiny,” Dr. Mercola states that we change our genetics from the foods we eat, the air we breathe, and even the thoughts we think. According to Dr. Mercola, epigentics helps explain why one identical twin develops cancer and the other remains healthy and why one becomes obese and the other remains lean.
Plan for a Long Life
Life expectancy, which is nothing more than a statistical average based on the probability of dying at a particular age, can be used as a starting point when doing retirement planning. Given the fact, however, that a high percentage of individuals who live to 65 survive to 80 and over, it behooves you to plan for a long life assuming that you’re in good health or you have the ability to take control of, and are motivated to improve, your health.
Being optimistic about, and planning for, a long life is good for your physical, mental, and financial health. When it comes to life expectancy, err on the optimistic side.
The National Reverse Mortgage Lenders Association (NRMLA) works closely with 300 member companies and over 2,000 individual members as well as with Congress, the Department of Housing and Urban Development, bank regulatory agencies, and state legislatures to review and refine the reverse mortgage delivery process.
If you are a homeowner age 62 or older and have paid off your mortgage or paid down a considerable amount, and are currently living in the home, you may participate in FHA’s Home Equity Conversion Mortgage (HECM) program. The HECM is FHA’s reverse mortgage program that enables you to withdraw a portion of your home’s equity.
HECM Advisors Group
Since 2000, the HECM Advisors Group has been dedicated to providing truthful, relevant content and conversation about the HECM reverse mortgage to professionals serving people at or in retirement. Through its network, they provide critical expert analysis from professionals spanning various disciplines pertaining to retirees.
Reverse Mortgage Daily
Reverse Mortgage Daily is the premier independent source for news, commentary, and analysis covering the reverse mortgage industry.
National Council for Aging Care
Nearly 10% of older adults experience some form of abuse on a monthly basis, yet most occurrences go unreported. The National Council for Aging Care provides resources for helping you identify, address, and prevent elder abuse.
The Fiscal Times
The Fiscal Times is a digital news, opinion and media service offering comprehensive quality reporting on vital fiscal policy, economic and consumer issues. It has become one of the most trusted sources of economic analysis and its effects on the country at large, including business and consumers.
FEDweek is the most widely-circulated information resource in the federal government. For over 20 years FEDweek has helped federal and military employees and retirees get the most out of their careers and the federal benefits they have earned.
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