Retirement Income Planning

Don’t Fall Into the Short Longevity Trap

Whenever I’m doing retirement income planning for a client, one of the most, if not the most, important decisions that needs to be made is the duration of the plan, or plan timeframe. The starting point, i.e., today, can be easily defined; however, the termination date is unknown in all cases.

This topic typically begins with a discussion of my client’s parents’ and grandparents’ longevity. I’m always surprised how people attempt to correlate their life expectancy directly to that of their parents or grandparents, particularly when one or more of their ancestors may not have lived a long life. They do this without acknowledging the fact that (a) the average life expectancy has increased significantly for someone born today compared to when their parents or grandparents were born and (b) our health is not necessarily controlled by genetics.

Increased Life Expectancy

Let’s take a look at the change in United States life expectancies for females who have traditionally enjoyed a longer life expectancy than males. Assuming your grandmother was born in 1900, her life expectancy was 48.3 years. The life expectancy for women born in 1950 increased dramatically to 71.1 years. Girls born in 2010 have an average life expectancy of 81.0 years.

When males turned 65 in 1950, they were expected to live another 12.8 years on the average, or until age 77.8. This has increased five years, with males turning 65 in 2010 expected to live another 17.7 years on the average, or until age 82.7. A male who reached age 75 in 2010 has an average life expectancy of 11.0 years, or until age 86.

Our Health Goes Beyond Genetics

Although it has been demonstrated that longevity has a genetic component, genetics, in and of itself, doesn’t necessarily control the health issues you will experience during your lifetime or how long you will live. While family health history is important, it is only one factor in determining your longevity.

If you haven’t heard about it, I would strongly urge you to read about the emerging field of epigenetics. Bruce Lipton, PhD, one of the leaders in this field, defines epigenetics as “the study of inherited changes in phenotype (appearance) or gene expression caused by mechanisms other than changes in the underlying DNA sequence.”

According to Dr. Lipton, our health is not controlled by genetics. Instead, the mind, toxins and trauma impact the fate of individual cells and our ultimate health. The mind plays a critical role, with “…your thoughts and perceptions having a direct and overwhelmingly significant effect on cells.”

Impact on Retirement Income Planning

The basic goal of retirement income planning is not to outlive our assets. Given increased life expectancies today that continue to increase, combined with the knowledge that our health and longevity goes beyond genetics, we cannot afford to simply look in the rearview mirror and use our parents’ and grandparents’ life expectancies as the basis for projecting our lifespan. To the extent we do this, we run the risk of falling into the short longevity trap in many cases, underestimating our life expectancy, and potentially making decisions that result in the premature depletion of our assets.