Understanding Your Life Expectancy
Don’t Outlive Your Money
Perhaps the greatest fear we experience as we grow older is not our eventual death but what might happen if we outlive our money.
Nobody wishes to become a burden on their children. Those without children might have no family to which they might turn. There are social safety nets but some of us may fall through the cracks and not find ourselves eligible for public benefits. And those who do qualify will live out their lives at a diminished standard of living.
This certainly won’t happen to you. You’ve either begun to save for your senior years or have decided that today is the day you begin your program for retirement security. The problem is, if you don’t want to outlive your money — how long does your money have to last?
The easy answer is to say that you’ll look up your Life Expectancy and then make plans for how much you need to save each year you expect to work and assume a rate of return, then spread that sum of money over the number of years you should live in retirement to be sure you never run out of money to withdraw. Simple. Easy. You’ve solved the problem. Or have you?
I don’t know how old you are but, for the sake of this article, let’s assume you’re 40 years of age. You’re just now entering your prime earnings years. You do an online search and a few life expectancy tables appear on the search engine. Looking at the tables you see that a 40 year old has a life expectancy of age 81. [This is unisex and based on 2000 Mortality. Some tables you find may be broken down by gender or another mortality table.]
You certainly don’t want to be at your 81st birthday party and left with $1.00 in your pocket so you plan for a cushion. You’ve done a great job of planning!!!! Is it time to make sure your affairs are in order and to make the rounds to say your final goodbyes?
To answer this question you need to read the FULL Life Expectancy Tables, those showing the numbers of people born and how many are living at each age.
Of every 100,000 people born in America, 96,419 are still alive at the age of 40. How did we determine that “Life Expectancy” is age 81? Looking at the table, at age 81 there are 47,694 people still alive. If you divide the number of people living at age 81 by the number of people living at age 40 (47,694/96,419) the answer will be 50%. That means that you, the reader, have a 50:50 chance of living to the age of 81. Life Expectancy doesn’t mean the age that you can expect to pass, it means the age to which you have a 50:50 expectation to live.
[Quick Sidebar: If you have a 50:50 chance to live till age 81 you also have a 50:50 chance to die before age 81. As you read on in this article, keep in mind the planning for dying too soon, and speak with a competent licensed life insurance professional.]
Fortunately you were one of the lucky 50% to make if to your 81st birthday. Last time we spoke you were at your 81st birthday party. If only you could go back in time to when you were 40 and started your financial plan, what age would you have targeted to make sure you didn’t outlive your money?
What you need to understand is that we have a moving target age. Let’s look again at the table. You’re one of those 47,694 people still alive. What’s the likelihood you’ll be living at age 85? The table shows that 34,471 people are still living at age 85. Let’s do the division and divide 34,471 by 47,694, and we learn that 72% of the people (like you) who’ve reached 81 go on to live until they’re 85. Life is looking beautiful for your future. So long as your money hasn’t run out before then.
I told you that we have a moving target age. Should you have planned for finances to last till age 85? Let’s jump ahead in time to your 85th birthday. What are the odds your friends and family will be planning your 92nd birthday party? At the age of 85 there are 34,471 people still living out of every 100,000 from the year you were born. Mortality is catching up with your crowd. Now some good news – there will be 13,111 still living at the age of 92. That means that at the age of 85 you still have a 38% chance to be living at the age of 92.
What’s the lesson you should have learned today? That planning not to outlive your money is no easy task. It’s going to take a blend of investments and annuities to guarantee that you live an independent lifestyle for your full life. And conversely, a proper life insurance program to protect loved ones in the event your life is cut short. And when this mix of investments has been selected, it needs to be implemented in the proper legal structures. These may include revocable and irrevocable trusts, business entities such as limited liability companies, all working together in harmony to protect you and your loved ones not only for your lifetime, but in creation of a legacy for your loved ones.
We, at Rabinovich Sokolov Law Group, urge you to take inventory of your finances and estate planning documents. For a comprehensive analysis of your position visit with us for a review of your estate plan.
Perhaps the greatest fear we experience as we grow older is not our eventual death but what might happen if we outlive our money.
Nobody wishes to become a burden on their children. Those without children might have no family to which they might turn. There are social safety nets but some of us may fall through the cracks and not find ourselves eligible for public benefits. And those who do qualify will live out their lives at a diminished standard of living.
This certainly won’t happen to you. You’ve either begun to save for your senior years or have decided that today is the day you begin your program for retirement security. The problem is, if you don’t want to outlive your money — how long does your money have to last?
The easy answer is to say that you’ll look up your Life Expectancy and then make plans for how much you need to save each year you expect to work and assume a rate of return, then spread that sum of money over the number of years you should live in retirement to be sure you never run out of money to withdraw. Simple. Easy. You’ve solved the problem. Or have you?
I don’t know how old you are but, for the sake of this article, let’s assume you’re 40 years of age. You’re just now entering your prime earnings years. You do an online search and a few life expectancy tables appear on the search engine. Looking at the tables you see that a 40 year old has a life expectancy of age 81. [This is unisex and based on 2000 Mortality. Some tables you find may be broken down by gender or another mortality table.]
You certainly don’t want to be at your 81st birthday party and left with $1.00 in your pocket so you plan for a cushion. You’ve done a great job of planning!!!! Is it time to make sure your affairs are in order and to make the rounds to say your final goodbyes?
To answer this question you need to read the FULL Life Expectancy Tables, those showing the numbers of people born and how many are living at each age.
Of every 100,000 people born in America, 96,419 are still alive at the age of 40. How did we determine that “Life Expectancy” is age 81? Looking at the table, at age 81 there are 47,694 people still alive. If you divide the number of people living at age 81 by the number of people living at age 40 (47,694/96,419) the answer will be 50%. That means that you, the reader, have a 50:50 chance of living to the age of 81. Life Expectancy doesn’t mean the age that you can expect to pass, it means the age to which you have a 50:50 expectation to live.
[Quick Sidebar: If you have a 50:50 chance to live till age 81 you also have a 50:50 chance to die before age 81. As you read on in this article, keep in mind the planning for dying too soon, and speak with a competent licensed life insurance professional.]
Fortunately you were one of the lucky 50% to make if to your 81st birthday. Last time we spoke you were at your 81st birthday party. If only you could go back in time to when you were 40 and started your financial plan, what age would you have targeted to make sure you didn’t outlive your money?
What you need to understand is that we have a moving target age. Let’s look again at the table. You’re one of those 47,694 people still alive. What’s the likelihood you’ll be living at age 85? The table shows that 34,471 people are still living at age 85. Let’s do the division and divide 34,471 by 47,694, and we learn that 72% of the people (like you) who’ve reached 81 go on to live until they’re 85. Life is looking beautiful for your future. So long as your money hasn’t run out before then.
I told you that we have a moving target age. Should you have planned for finances to last till age 85? Let’s jump ahead in time to your 85th birthday. What are the odds your friends and family will be planning your 92nd birthday party? At the age of 85 there are 34,471 people still living out of every 100,000 from the year you were born. Mortality is catching up with your crowd. Now some good news – there will be 13,111 still living at the age of 92. That means that at the age of 85 you still have a 38% chance to be living at the age of 92.
What’s the lesson you should have learned today? That planning not to outlive your money is no easy task. It’s going to take a blend of investments and annuities to guarantee that you live an independent lifestyle for your full life. And conversely, a proper life insurance program to protect loved ones in the event your life is cut short. And when this mix of investments has been selected, it needs to be implemented in the proper legal structures. These may include revocable and irrevocable trusts, business entities such as limited liability companies, all working together in harmony to protect you and your loved ones not only for your lifetime, but in creation of a legacy for your loved ones.
We, at Rabinovich Sokolov Law Group, urge you to take inventory of your finances and estate planning documents. For a comprehensive analysis of your position visit with us for a review of your estate plan.