subject: Retirees Have an Investment Horizon Longer than They Think [print this page] Retirees Have an Investment Horizon Longer than They Think
Retirees at age 65 often think they have about 10 years left. They're statistically wrong and their projections on the investment amount they'll need to carry them through retirement will be wrong too. They misperceive their remaining life expectancy. Here's what they should know about the time they have left. The typical life expectancy you hear about is based on how long people statistically live starting from their birth year. As an example, people born in the year 1900 - the turn of the 20th century - had a life expectancy of about 53. That means 50% of the people born in 1900 would live beyond 53 while 50% died before reaching it. Life expectancy is statistically the '50/50' age that people will live to. Better health and medical care has increased our life expectancies. For those born during the mid twentieth century have a life expectancy about 77. So 50% of these people will live longer while 50% will die by then. Actually, life expectancy values are an average of everyone born in a certain year. But life expectancy actually varies according to your sex and socioeconomic status. Women's life expectancy is 79.9 while men's is only 74. And white collar workers statistically live longer then blue collar workers. So, how you control your living style and health clearly has an effect on your life expectancy. So don't expect to kick the bucket at the 75 year mark. And there's more to the story...*Your remaining life expectancy increases with age!The older you get, the further beyond your original life expectancy you're expected to live! This happens because you've survived early death statistics that restricted your original life expectancy based on your birth year. Mortality statisticians track this extended life expectancy for persons based on their current age. As an example IRS tables say that if you're 65 years old, you're expected (50/50) to live to 86; if you're 70, you're expected to live to 87; and at 75 you're expected to live to about 89. You won't live forever but these 'remaining life expectancies' are much longer than you may have thought.So you can see that retirees generally have a much longer horizon than they think. When you plan your retirement years, prepare based on living longer. This longer life will affect your living style, portfolio horizons, and withdrawal rates. But of course it's all statistical. Each of us is different. But if you've made it to 65 you're probably tougher than you thought.
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