How long will I live?

I don’t know the answer to that question, and you may not want to.  But it helps to have some idea – for retirement planning, to understand longevity risk, or maybe you are just curious. It’s not too difficult to get an average figure.  The problem comes in making that figure realistic for you. 

If you live in New Zealand, you can use Statistics NZ’s How long will I live? calculator here. The UK’s Office for National Statistics has a similar calculator here. The output from these two is quite close, so if you live in a similar country you could use these as rough guides.

Say you are currently (in 2015) a female 65 year old, so you were born in 1950.  The calculator will tell you your life expectancy is between 88.1 years and 89.4 years depending on which of StatsNZ’s “death rates” assumptions you use.

So a life expectancy of 89 years is a useful estimate. You could use that in your planning, knowing that is the average expected lifespan for women of the same age as you who have lived to age 65.

However, it is not the whole story.  For various reasons (see here) “life expectancy” is likely to underestimate how long you will live.  So you might want to consider how much longer you might live. That could be very important for reducing your “longevity risk”, which is the risk of running out of money in retirement.

One quirk of life expectancy is that more people live to be older than “life expectancy” than die at younger ages. So, more than half of this cohort of women are expected to still be alive at age 89.  The most common age at death for this cohort of women is expected to be age 92, and one in five of them is expected to live to at least 95.

Some charts might help. Here they are – for men who are 65 in 2015 as well as women.

How should you use this information?  It can’t give you a single answer – uncertainty still remains:

  • There is uncertainty about whether the numbers in the StatsNZ calculator turn out as expected or not – should the whole chart be shifted to the left or right?
  • There are many personal factors (genes, behaviour, pure chance) which will influence your own personal lifespan – are you more likely to be in the left or right of the chart for your cohort?

The first of these points doesn’t change the answer much, as we can see from the small range of the StatsNZ death rates assumptions.  But if you are very optimistic about how much medical technology is going to improve things over the course of your lifetime, then you could add a year or two on.

The second point is more important. To allow for you lasting longer than your peers, test your retirement plan with a higher, but still plausible, lifespan. For example you could assume you will be in the one in five expected to live to at least age 95, especially if you are optimistic about your healthy genes and/or good behaviour.

If you are younger than the 65 we are using in this example, start with the results of the calculator for your age. Each decade or so you are younger than age 65 adds a year or two to allow for general longevity continuing to improve.

This would mean a female fifty-something would test a retirement plan for a lifespan of around 97 years.

As a rule of thumb, and especially if you are a conservative soul, allow for longevity risk by planning to live beyond your eighties and well into your nineties.
A longer report written with some actuarial colleagues which touches on this data as part of an analysis of the market in New Zealand for retirement products can be found here.

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