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Episode #641 - How Long Will You Live After Retirement?

INTRODUCTION: LONGEVITY PLANNING AND THE PROBABILITY OF RUNNING OUT OF LIFE

Roger: In retirement planning, we focus on the probability of running out of money, but rarely on the probability of running out of life. Consider: we'd never accept a retirement plan with a 60 percent chance of running out of money by age 90. That would feel very imprudent, not feasible. Yet, for a 60-year-old man in average health, the odds of even reaching 90 are only 36 percent. Life is finite. Finite is existing or enduring for a limited period of time. So the question we're going to explore today is: how do we factor our longevity into our retirement plans so we can rock retirement?

Roger: Well, hey there, welcome to the show dedicated to helping you not just survive retirement, but to have the confidence to lean in and rock it. My name is Roger Whitney. I'm a practicing retirement planner with over 35 years experience, founder of a retirement planning firm, Retire Agile. Today on the show, we're going to talk about longevity, and how do we factor this into our plan? Because there are trade-offs for assuming that we're going to live way too long. So we want to be prudent with that assumption. The way we're going to do this is we're going to have a chat with Dr. Bobby Du Bois on some of the science around longevity and have some financial discussion about the trade-offs in assuming you're going to live to 90 or 200. There's a real cost to your life in that assumption. And then after that discussion, I'm going to present a working protocol to start to factor longevity estimates into your plan with the intent of you rocking retirement. So that's the plan today. We're also going to have a rocking retirement in the wild story.

Roger: First off, I want to give a big shout out and hug to everybody who emailed me, sent me a personal message and sent me a text just acknowledging Sherlock, our Great Dane's passing, and sending me their well wishes. It is very bittersweet. Obviously he was a very integral part of our life as we became empty nesters, nothing like a Great Dane's affection and wanting to be with its people. That's the part we really miss. That's the better part. The sweet part is that this weekend, Shauna and I drove out to Breckenridge, did a hike in the snow and then went golfing the next day. Not having a dog is a sweet part of it, having a little bit more freedom. We're going to see if we can go a year or two without a dog. But Sherlock is always on our mind. And I just want to share one audio message from Joe that gives us all great advice, regardless of where we are on our walk.

Joe: Hey, Roger. I'm heading off to Spain for a month of walking the Camino, the Primitivo and the English, with friends and family. I just read that Sherlock passed. It makes me sad. We've lost dogs before. It's never easy. But we will keep the faith. Look at adopting another dog. And keep on walking, just like we do on the Camino. Take care, my friend.

Roger: Joe, have a wonderful walk. It sounded like you were recording that from the airport. So safe travels, my friend, and we will all keep on walking. With that, before we get to Bobby's conversation, let's have a rocking retirement in the wild story.

ROCKING RETIREMENT IN THE WILD

JERRY RECONNECTS WITH FRIENDS THROUGH BACKPACKING ON THE APPALACHIAN TRAIL

Roger: So now we're going to share one of you out there in the wild rocking retirement. And this comes from Jerry, and I'm just going to read Jerry's experience. Now, Jerry is an outdoor adventurer, which I love. And I love that we're getting this rhythm of people that are out there doing sort of, call it Instagram travel, things that are very picturesque. And we also have examples of people that live a very chill life that aren't so driven to get out and do stuff. You do you, and that's the key to rocking retirement. So here's Jerry's story.

Roger: I am 67 and retired for four years. This past August, I backpacked with two college friends through the 100-mile wilderness section of the Appalachian Trail in Maine. We hiked 121 miles over 11 days. An outfitter resupplied us at the midpoint to keep our backpacks approximately 30 pounds, which is a great use of money as we get older. Maine is wild and beautiful.' I've never been, Jerry, I want to go. 'The remoteness and distant views were amazing. It was challenging, but very enjoyable. We started backpacking during the spring of 1981 and did week-long trips for most of the next 15 years. Then family time and work became the main priorities. We resumed backpacking sections of the Appalachian Trail about 10 years ago. We are fortunate to have good health. The trips give us time to reconnect and provide motivation for daily physical activity leading up to it. We are currently planning on backpacking a trip to the Wyoming Wind River in July of 2026. It will be the same trail we hiked in our 1986 trip. Wow, I love that connection back to friends and reestablishing these rituals. Nothing like an old friend, is there Jerry? Thank you so much for sharing how you are rocking retirement.

PRACTICAL PLANNING SEGMENT WITH DR. BOBBY DU BOIS

WHY LONGEVITY ASSUMPTIONS ARE OFTEN FLAWED AND HOW THEY IMPACT RETIREMENT PLANNING

Roger: It is an old joke in the retirement planning community that if I could just tell how long a client is going to live, the planning process becomes so much easier. If we just had a finite end date, this stuff gets a lot easier a lot more quickly. But that doesn't happen. We have people that die prematurely. We have people that live long. We have these longevity calculators. How do we determine when our plan ends? To help me think through this in a data-driven way is Dr. Bobby Du Bois, coach in the Rock Retirement Club. How you doing, Bobby?

Dr. Bobby: I'm feeling great and feeling like I'm going to live forever.

Roger: Well, technically, and maybe we get into this, remind me how old you are.

Dr. Bobby: I will be 70 in July.

Roger: 70 in July. Every year you age, your longevity statistics improve, if I'm not mistaken.

Dr. Bobby: It does. Yeah. Don't ask me for specific numbers. Yes, it does.

Roger: So currently as a default, Bobby, in retirement planning, let's say somebody that's 55 or 60, I use 92 as the end date for a male and 94 as an end date for a female. Those are significantly above what the standard longevity table says, and I don't have those numbers in my head. That seems aggressive. But how do we start to triangulate how long we need to plan for?

Dr. Bobby: Okay. So I think there really are three issues embedded in this. The first is: in general, how long does the average person live, and what percentage of folks live to 90 or a hundred? The second piece of the puzzle is a realization that if you know you're going to die at 79, the amount of money you need to be comfortable when you begin retirement is a really lot less than if you think you're going to be 90 or longer. And then of course the million dollar, billion dollar, question: how long am I going to live? We don't have a perfect answer, but we're going to triangulate a couple of different things. So hopefully people will get a sense of why the default of 92 or 94 maybe shouldn't be quite so high, because very few people live that long.

Roger: I think part of the logic of having it so long in a planning scenario is you don't want to undershoot the runway financially. We don't want the risk of outliving your money, which is asymmetric in a way. So we're trying to solve for the significant risk of running out before you die, with the willingness to accept that we may have more money than we intend to when we actually do die. I think that's the logic behind it.

Dr. Bobby: Yes, and I get the logic. But just the way we have a Monte Carlo simulation of what the market does and what inflation does, we probably ought to have a Monte Carlo simulation on how long you're going to live, because I would assert we are erring on the side of being too conservative. You might do a Monte Carlo and say I'm comfortable at 90 percent success. Some people might say I want 95 percent. Some people might say 80 percent. If I had two side-by-side Monte Carlos, one assuming I died at the average age of, say, 80, and one at the age of 90, 92, 94, we would see a very big difference. And then people can have two conversations: one financially, how do I want to manage my life? And two, am I being too conservative or aggressive by choosing one age or another? Because those two variables are going to move you a lot. And I hope by the end of this, people will realize that.

Roger: Yeah, and the goal with this will be: what do we do with this at the end? So let's explore whether there is a way to know. How do we start to address this in planning?

AVERAGE LONGEVITY STATISTICS AND THE FINANCIAL IMPACT OF PLANNING ASSUMPTIONS

Dr. Bobby: Let's walk through a couple of things. One is: what does the average person do? Men don't live as long as women for a whole host of reasons, women are nicer, so they deserve to live longer than us men. But on average, if you are 55 years old, and these numbers don't make much sense if you're talking about a two-year-old because a lot of people die along the way, so we're going to take what might be the average audience age. If you are 55, a man on average will live to be 79. A woman on average will live to be 83.

Roger: Which is significantly less than the numbers that we have as a default that I mentioned.

Dr. Bobby: That's my point. And everybody looks at those numbers and says, 'Well, I'm going to beat the average.' But beating the average and saying, 'Okay, I'm a man at 79 and I think I'll live to be 84', that's a lot different than saying I will live to be 90, because there's a huge fall-off. Let me give you the numbers. Although the average is 79, that means half the people are going to die before 79, not 1 percent, not 5 percent, not 10 percent off. So you've got a great likelihood you aren't making it to 79 from age 55. Only 15 percent of men live to be 90 starting at age 55. So it is a small number. Now if you push it out to 92, 94, that number gets a lot smaller. Women: 25 percent will live to be 90 starting at age 55. These are averages. If you told me you never smoked and are really, really healthy, then obviously those numbers are going to look better. But this is the average. And so the default of 92 and 94 in a Monte Carlo, I think it's fine, but I think you're leaving money on the table because most of us are not going to live that long. And if you leave money on the table, you're not enjoying yourself potentially along the way. And that's why this really matters.

Dr. Bobby: Now, the other thing we probably should put into the stew before we dig into the question of how long am I actually going to live, is: what's the difference money-wise? We have a few numbers to share so people can get a sense that this isn't theory, it actually plays out. One of the Rock Retirement coaches, Susan Lee, helped me put together a scenario modeled in an Excel sheet. We posited that this person, age 65, was going to spend $100,000 a year in retirement. They would have a Social Security payment of $48,000, retire at 65 with a 6 percent annual investment return and a 2.5 percent inflation rate. So $100,000 in expenses, half of that's going to be handled by Social Security, the other half has to come from somewhere else. If you envision you're going to live to be 79, the nest egg you need is a little over $700,000. If you posit you're going to live to be 90, the nest egg needs to be 40 percent higher. If you think you're going to live to be a hundred, then the nest egg has to be almost 70 percent higher. So this isn't just a theoretical exercise. If you shift from the average of 79 to something like 90 or a hundred, which is what most of these models do, your nest egg has to be a lot bigger. Your ability to retire is going to vary depending upon these numbers. That's why I'm so passionate about this.

Roger: And I agree with you that it's a real issue, how do you manage the tension between eking out as much life as you can today and being okay, regardless of how long you live. One issue I have with academic exercises, especially with spreadsheets, is from a planning perspective, you have a lot of nuances. We're assuming a linear 6 percent return, and in reality nobody gets a linear return. We don't know what the returns will be, high or low, or in what sequence. We don't know what the inflation rate will be, the last five years has been about 4.5 to 5 percent. And we also don't know what spending will look like because life happens, either good or bad, that just bumps the spending. Those are realities that don't get captured in this. Not that it invalidates it, but those are nuances that make this a lot harder than the simple math can always point out.

Dr. Bobby: Yeah, and I wouldn't say that this little model is equivalent to, you know, MoneyGuide or whatever does a much more sophisticated handling of inflation and returns. But I don't care what model you use, I can guarantee you that if you switch from 79 as your end-of-plan to 90, 95, the amount you've got left or the amount you need is going to drastically change.

Roger: You're going to need more money. That's the key core concept, you need more money if you live longer.

Dr. Bobby: And we allow our folks to look at the Monte Carlos, look at whatever simulation and say, 'Yeah, I can live with that, I can sleep with that' based on investments and spending patterns. But we're not giving them an important piece of the puzzle, which is: if you live longer or shorter, that number needs to be up or down. Allow them to help decide what the end-of-plan date is. If you are 55, you had a heart attack, your family historically doesn't live very long, putting in 92, I don't think makes sense.

Roger: 100 percent.

HOW TO BETTER PREDICT YOUR LIFESPAN USING AVAILABLE TOOLS

Dr. Bobby: So can we guesstimate better than just the average?

Roger: And that is sort of the next phase of this, we're looking at the population as a whole, right? And access to health care, socioeconomic status, whether you smoke or you don't smoke, family history, personal health history, all factor into adjusting from that average. So how do we approach that thoughtfully?

Dr. Bobby: The punchline isn't that Dr. Bobby is going to give you an equation where you fill in the numbers and you'll know exactly what it will be. I suspect in 10, 15, 20 years with predictive modeling from AI and a lot more genetic information, we'll have a better idea. But for now, what do we do? The simplest is: don't just use the averages, but plug in numbers into something. There was an interesting Wall Street Journal article a couple of months back where a woman was trying to figure out the whole nest egg thing and she went to various actuarial calculators. Social Security has one, the Society of Actuaries has one. She plugged in some basic demographic information and what she found was the numbers that came out for life expectancy differed a lot, five to ten years. And as I just said, the difference of five to ten years makes a difference. So absolutely use one of those calculators. That's a starting point.

Dr. Bobby: The next piece of the puzzle is a realization that the most common cause of death in the United States is heart disease. So we can't model all risks known to man, but we've got really good prediction tools for heart disease going back 20, 30, 40 years. There's a new one called PREVENT, or PREDICTOR, one of those two. If you look up cardiac risk calculator online, you'll find them. We could put something in the show notes. You've got to know a little bit more, your cholesterol level, your blood pressure, and a few other things. But these are standard things that are easy to find. If you have a portal for your medical record, you plug that in. It used to be they would only give you a 10-year prediction, but now there's a 30-year prediction. So you can get a better idea given whether you have diabetes, how abnormal your weight is, and you plug all that stuff in and get a number. It's not perfect, it doesn't tell you about cancer or anything else, but it helps you with the number one cause of death. That's the second thing you can do.

Roger: What's interesting about that one is I can see this being a rabbit hole of chasing precision on something that you can't actually figure out. And I imagine there are plenty of people that sell you more and more calculators to give you a false sense of certainty because of all the questions they ask. But it is better than the basic life table and whatever judgment from a planner goes into his number. It's still better quality data, but it's not going to make a dim room bright because you literally can't know.

Dr. Bobby: You can't. But again, do I use the default 92 or do I adjust that? This will give you directionality on what you want to do. 'Oh, I think given all the things I've just explored, I'm going to live to be 95', or nah, that's a bit optimistic. So that's the next piece of the puzzle. The third piece is dementia. There isn't a perfect calculator for the likelihood of getting dementia, but many people get genetic profiles, whether through 23andMe, Function Health, or through their doctor, which test for the APOE gene. There are different versions of it: some increase your risk a lot, some increase it a little bit, some reduce your risk. So you can directionally ask: am I at average risk for dementia, higher, or maybe lower? If your cardiac risk doesn't look as good as average and your dementia risk is higher than average, now you're beginning to build a picture that, could you live to be 130? Sure, but the likelihood isn't huge.

Dr. Bobby: And now we get to the thing I don't want you to do, which is what folks have probably run across: these things called biologic age clocks. These are blood tests and algorithms that purport to say, 'You are 58 years old chronologically, but if we measure your blood and what's happening in your tissues, you're actually 52, you're younger and spryer than you might otherwise be.' Or the other way around: you're 63 biologically and only 58 chronologically. The reason I'm saying save your money is that the concept is fantastic, your tissues might age faster or less well depending on lifestyle. You look at somebody's skin and say, 'My God, you still look like you're 30 when they're 60.' Or you look at somebody who's been out in the sun and say, 'You're 60, but you look like you're 80.' So we know that your tissues speak differently than your chronology. And they take that concept and try to run with it. It is not ready for prime time. They'll take your money and then try to sell you supplements or something else to improve your biologic age. None of that has been tested over five or ten years. As I said, this could be really powerful, it just isn't quite yet.

THE EMOTIONAL AND PSYCHOLOGICAL IMPLICATIONS OF LONGEVITY TESTING

Roger: So a question about how to dial in a little bit better, from what I'm hearing, use a more sophisticated calculator that can take in the major cause of death, which is cardiac, and you mentioned PREVENT. We'll get a link to whatever it is and put it in the show notes and the Noodle. And then also dementia is one as well, and there's a gene you can test for. Now here's a question related to this. Because we've talked about this when it came to extensive blood testing, I use Function Health, I tested for the dementia gene, et cetera. And we talked about the hazard of going down that rabbit hole from a psychological standpoint. I felt comfortable I would be okay with the information and it wouldn't destroy my psyche either way. But I know people, my wife, I guess I shouldn't speak for her, but we've talked about it, she has no interest in knowing. Going down the rabbit hole of this, we have to prepare ourselves for what we're actually willing to know without influencing how much we lean into life and our psychological quality. A good example of a second-order consequence: I remember talking to a Rock Retirement Club member a number of years ago who was a scientist. He tested for the dementia gene. He was cool because he's a scientist, very comfortable with it. And his sister didn't want to know. But then his sister finally said, 'I want to know whether you have it or not.' And I think in this case, he did. And she was upset because now it's in her mind that she might have it too. That's a second-order consequence we don't always think of. So how much should we go down this rabbit hole from a planning perspective, and how do we evaluate whether we're ready for it, or our spouse is ready for it, if we do?

Dr. Bobby: It's a great question and I'll try to answer it a couple of different ways. I think knowledge is good. Yes, you are opening up a possibility that the numbers won't look as good as you hope they would. But I'm trying to get at the fact that the default of 92 for a man or 94 for a woman is just unrealistic for most people. Do you want to know the results of these things? There are reasons why you might and reasons why you might not. Now, if you apply for life insurance and you know some of these things don't look so good, doing a lot of tests, you can't lie on your life insurance application or annuity application. And so you may find something that makes you more difficult to insure for long-term care or whatever it might be. So that's something to think about. Secondly, if you do the cardiac numbers and they don't look so good, it might motivate you to do a better job on your weight, your exercise, et cetera. And as we talk about with the dementia gene, it is not determinative. Just because you have the higher-risk version doesn't mean you are going to get dementia. There are 12 risk factors for dementia. Genetics is one of them. But if you have that, it might encourage you to do everything you can on the other 11 to reduce your risk. So it can be motivating for some people.

Roger: And I think that's the key, especially on the cardiac end, there's a lot that can be influenced where we have agency. I had a client, Tom, who has since passed, probably about seven or eight years ago now, and he had major cardiac events. He was in his mid-60s, actually was a private pilot, an incredible story, funny character. And he worked very closely with his doctor. We were planning for this, Bobby, and he wanted to use his money before he died. So he would interrogate his doctor over and over about his realistic life expectancy. It was a very interesting journey with him from the financial side, working with him on the spending side of how much is too much. Because he eventually actually got it relatively close. He passed at about 77 and we had six or seven years of him estimating when he was going to pass, me wanting to enable him to use his resources while he could, but also making sure we don't undershoot the runway in the event that he is one of those outliers that lives to 90 or whatever. It was an interesting journey and it solidified something for me: it's not a one-and-done decision. It's a constant recalibration based on life as it unfolds, health-wise and spending-wise. You've got to be agile with it. You can't just make one assumption and never revisit it again.

Dr. Bobby: I totally agree. Just like you look at your net worth once a year, you should probably reevaluate your life expectancy once a year. Now, the important thing is in all the scenarios of his life, yes, you could have put in 92 in his Monte Carlo simulation, but that would have kept him from spending an awful lot of money. Now, he may have had more money than he knew what to do with and it didn't matter. But for some people who are like, 'I'd love to go on this trip, but will I have enough money?', knowing whether to put in 78 or 92 is something worth considering. Knowing that it's not a perfect answer, but it's just another piece of the puzzle.

REAL-LIFE EXAMPLES OF HOW LONGEVITY ASSUMPTIONS INFLUENCE MAJOR DECISIONS

Roger: So here's an interesting aspect of something we're actually dealing with right now. We have a joint client, one spouse works a very demanding job. The other spouse, in their late 50s, has had multiple cardiac issues that they're working on, things that impair longevity. And they're working on the question: when does the working spouse, who works a very demanding job, retire? The decision is that they don't want to miss that season of life with their other spouse because that spouse does have an impaired longevity. It's very clear. And it could be any day or it could be 10 years, but it's definitely impaired. So here the question is not 'can I go on that trip?', it's 'can I retire safely so I can be in a season with this spouse?' Which is even more complicated because the demanding spouse probably has normal longevity. But I think this is an instance where longevity planning can be explored, not to come to a conclusion, but to come to a more nuanced judgment, so they don't miss a season where they can be together.

Dr. Bobby: It's a great example. And to me, the question for the couple would be: if you retire early, spend more time with your spouse, and you play that out, you end up living longer than anticipated and your money runs lean near the end, how would you look at that? Would you say, 'No, that was money well spent, that was time well spent. Yes, I had to economize a bit more when I got older, I had to downsize, I had to stop doing a lot of other things, but the time with my spouse more than made up for that.' That's a healthy discussion. If you don't love your spouse quite so much and you're looking at a life that could go on another 20 or 30 years, you might look at it differently.

Roger: Yeah, and history does tell us that most people regret what they didn't do, not what they did. What other takeaways do you have for someone navigating this for themselves?

Dr. Bobby: I think we've pretty much said it. It's really just getting rid of the default button in your projections and playing around with different ages and trying to figure out whether you're likely to beat the average or not. Now, obviously if you're 42, it's hard to do much predicting, but as you get older, it becomes clearer. First, look at your parents, how long did they live? Your brothers and sisters, how long did they live? That's a good piece of the puzzle. It turns out that 50 percent of your health and when you're going to die is based on genetics and you can't change those. And if you're going to live to be 90 or a hundred, that's probably 70 percent genetics. People who live really long, a lot of it comes down to genetics. You're not going to run a genetic test, but just look around at your family. It's not a bad starting point.

Roger: One thing that just came to mind: if you build a plan of record and you are relatively overfunded for your base great life and your discretionary wants, this can be a useful tool, but maybe a little less meaningful. But if you are constrained or highly constrained, this can be a game changer on the upside. By not just defaulting to 92 and 94 and being more realistic about it, you may be a lot less constrained and be able to retire earlier. So it has a bigger impact on people that are more constrained in their plan of record. And that comes with the opposite side of the coin, you've got to be careful with it though, because it could easily become a tool of justification for spending now.

Dr. Bobby: Absolutely. And if you open your eyes and look at it and say, 'I'm using an ending date of 79 or 80 versus 90, I understand it could go the other way and I might live a lot longer, and as I get closer to that age I might need to economize, but I accept that's part of the model I would like to live by,' as opposed to just slavishly saying the Monte Carlo has to be 95 percent and I'm going to put in an age way out there.

Roger: Very interesting discussion, something that I need to do some work on as to how we integrate this thoughtfully into our practice. As always, Bobby, you bring interesting things. And I think this one's actually very actionable and can have a meaningful impact on people's lives.

Dr. Bobby: I hope so.

ROGER'S LONGEVITY FRAMEWORK

A WORKING PROTOCOL FOR INTEGRATING LONGEVITY ESTIMATES INTO YOUR RETIREMENT PLAN

Roger: I think that was a very important conversation and something that's often overlooked in retirement planning, and, I'll be blunt, in my practice as well as I think about this topic. So what I want to propose today is a working protocol, version one, of how you start to integrate more nuanced longevity estimates into your plan. This is a work in progress, as everything we do is, because we're agile around here.

Roger: So what is the intent of having a protocol for thinking about our longevity assumptions? It's to make a thoughtful decision that can inform your retirement planning and your spending, and help with tactical decisions like when to retire, how quickly to do Roth conversions, how quickly to gift, and all those other things. Our intent is just to have a more informed assumption so we can better plan as life unfolds.

Roger: In retirement planning, the default that we're all taught is that failure is always running out of money. So the planning community always takes a very conservative financial view because running out of money is the only kind of failure we typically factor in. Rarely, I don't think ever, have we really talked about internally in our community about the trade-offs to having too conservative a longevity estimate. Because there's a real trade-off: as Dr. Bobby and I chatted about, it means you're going to need more money. It means you may need to work longer, or deny yourself earlier in life, or maybe take more investment risk. These are real trade-offs that are not discussed very often.

Roger: So currently in our process at Retire Agile, our working assumption for a male in terms of longevity is 92 years old. Our current working assumption for a female is 94. Those are hardwired as the default when we think about longevity planning. So here is a working protocol for determining this in a more thoughtful way.

Roger: Step one: start with a baseline estimate based on your age, your sex, your health status, and whether you smoke or not. To do that, we'll have links to the calculators I mentioned in our Noodle email, where we share a lot of links. If you're not signed up for the Noodle, you can go to thenoodle.me and sign up for our weekly email with a recap of the show and helpful exclusive content as well as resources. So for the first baseline estimate, we're going to go to the American Academy of Actuaries longevity calculator. Let me get over there on my browser and walk through it. It's free, you don't even have to sign up or give your email. We'll have a link to this in the resources.

Roger: So I entered my name, Roger. I am age 59, male, and I put my retirement age at 60. It asks if I smoke, I do not and never have. And then it asks my general health in three categories: poor, average, or excellent. I'm going to say excellent because I've been on this health journey and I check my labs. When you do the calculator, you can see the probability of living to a certain age. Let me give you mine as an example. I am 100 percent likely to live to age 60, yes, I've got the rest of the year to be thankful for. I'm 97 percent to age 65, 93 percent to age 70. But let's go out a little farther. What is my longevity estimate for a 60-year-old male, non-smoker, excellent health? The probability of living to age 90 is 44 percent. So less than a 50-50 chance that, given my demographics, I will live to age 90. To age 95, I have a 21 percent chance. To age 100, a 6 percent chance.

Roger: Now let's play with some of these assumptions. Let's assume I am in average health, my probability of living to age 90 drops to 34 percent. Living to age 85 is about 55 percent, so a 50-50 chance. Now let's say female, excellent health: the probability of a female, age 60, non-smoker, excellent health living to age 90 is 55 percent. To age 95 it's 31 percent. Now let's compare that to my default assumption for a female, which is 94. Statistically, according to the American Academy of Actuaries, a female in excellent health at age 60 only has a 31 percent chance of actually getting to age 95. But that is a good conservative assumption if you're a retirement planner, because failure is defined only as running out of money, not running out of life and not using your resources. So that would be a baseline. I would use the American Academy of Actuaries calculator as a baseline.

Roger: Now stop for a second. I think this is likely good enough for long-term forecasting, it gets you 90 percent of the way there. Because we don't want to over-complicate this assumption. We just want it to be more informed. I'm reading up on the Pareto Principle, the 80-20 rule, where 20 percent of the effort usually gets you about 80 percent of the way there. This is likely that way for most of us. So for average to excellent health, this is probably good enough to inform, and then you can make a judgment call with your planner about what planning age is realistic.

Roger: Now realize: when you put in the planning age you decide on, let's say you decide to go to age 90 rather than 92 for a male or 94 for a female, that is in the plan. But again, in this protocol, you'll revisit it to update it as life unfolds. So you can hold this a little bit lightly and we're all going to make our own judgment calls. But you want to ask yourself: is there anything to suggest I am outside the norm? Are there any extreme outliers in my family in terms of longevity, they all live to 100, or they all die early? Are we a couple with very different health profiles? Because now we're dealing with two health profiles and longevity assumptions.

Roger: If you feel like there is, maybe you can go a step further if you choose. One option is to go to the American Heart Association and use their more detailed calculator. Why would we go there? Heart disease is the leading cause of death in America, accounting for more deaths than all forms of cancer and accidents combined. And Dr. Bobby and I have talked about this on the show. So this is the biggie. The American Heart Association calculator asks a lot more detailed questions, your total cholesterol, your HDL, your diabetes status, your BMI, your lipid-lowering medication, antihypertension medication, your zip code. You'd actually probably have to pull out your labs. But if you wanted to get a little bit more detailed, focusing on the number one cause of death, this would be a calculator you could go to. I would suggest it only if you have a couple with different health profiles, a family history of heart disease, or some other extreme outliers. That would give you an even more nuanced estimate that you can make a judgment call about.

CHOOSING YOUR LONGEVITY RISK FRAMEWORK

Roger: Once we've done that, now we have a more nuanced estimate. Next step is: what do we use? So I'm going to give you a longevity risk framework to consider. If you want to be very conservative in your longevity assumptions, use 92 for a male and 94 for a female. If you want to be moderate, use 88 for a male and 90 for a female. And if you want to be aggressive, 85 for a male and 88 for a female. You'll want to do that within the context of your own unique journey, your opinions and preferences, and the calculators that can help you dial in a little bit better. And just choose: do you want to be conservative, moderate, or aggressive? Because depending on what you choose, it changes the feasibility of your plan.

Roger: If you are aggressive in your longevity assumptions, meaning that you assume you'll die earlier, that is going to potentially give you the option of retiring earlier, spending more money, et cetera, because you're planning for a more normal or impaired longevity cycle. Whereas if you're very conservative, like our current default at Retire Agile at 92 to 94, the odds of you actually getting there are a lot lower. And if you start to combine the probability of running out of money with the probability of reaching those ages, the chances become very, very low that you'll actually run out of money if you're triangulating both of those things. But that will change your baseline assumptions.

Roger: So now what do you do? Well, now you choose your baseline assumption and then reevaluate systematically. I would suggest in this current protocol that every other year, you take a look at that end age for each of you, or yourself, perhaps use the calculator again, inform that judgment call based on how you are health-wise, how life is unfolding and your habits, et cetera. Look for major health changes to see if that assumption is still relevant, or whether you need to move it up or lower it depending on how your life is unfolding.

Roger: Another option in your feasibility planning: once you have your feasible plan of record, let's say with the default conservative ages, the ones I use, 92 and 94 for male and female, you can create a what-if scenario where you change one variable, which is your longevity. You can go from 92 and 94 to 88 and 90 to see the impact of the assumption isolated within your feasibility testing. Very simple to do with retirement planning software, you can just compare them side by side. That way you're not just pegged on one number with a very conservative assumption. You can bring more color to your decisions by also looking at a moderate or average assumption when it comes to longevity. Because that might buy you more vacations, less investment risk, all sorts of things. It will influence the decisions downstream that you might not be aware of.

REAL-LIFE CLIENT EXAMPLES OF LONGEVITY PLANNING

Roger: So I think that is a good version one of a protocol. Number one: start with a baseline estimate. Number two: evaluate whether you want to get more nuanced using the American Heart Association's calculator. Number three: choose your longevity framework. Number four: put that into your baseline assumption. Number five: reevaluate it at least semi-annually or if you have a major health change. And then consider stress testing different longevity assumptions to give you more context on the financial and life decisions you're making along the way. So let's talk about this a little bit in practice with two examples from my practice over 30-plus years.

Roger: Example number one: a married couple, both age 60. I've changed some of the facts and details, but here's the situation. The wife has a very high paying, very high stress job requiring a lot of hours. She has a normal life expectancy, no health issues to speak of. Husband, also age 60, recently retired, with major heart issues over the last 10 years. He is now on Social Security disability because of all of these issues. Financially, she could retire, but it would be constrained to their base great life and some discretionary wants. And there's a tension they have to figure out how to manage. Does she continue to work to provide more financial security, one more year of income, she makes a ton of money, it'll pad their financial assets? There's that option. But the tension is this: her biggest fear is working ungodly hours and being devastated if her husband died while she was at work. This is where some thoughtful longevity planning can come into the discussion, to help them find a balance between that tension, understand the trade-offs of retiring earlier than she otherwise might, and still have clarity and confidence of what her life might look like if he were to die prematurely. This is where a longevity estimate can really be powerful.

Roger: Another example: a single male, age 67, similar massive heart issues, a very impaired heart and an impaired life expectancy. No spouse. Wants to die with zero. In fact, this particular client used to do three-gun competitions, which is awesome. He was so excited talking about it, a real go-getter, no nonsense. He wants to die with zero. And I recall he has since passed. I recall trying to let him spend, gifting to his daughter, traveling, doing things, and he was always pushing me. 'I've talked to my doctor. I interrogate him every time. He won't give me an answer, but I think I'm going to die at this age,' and he would come up with a number. And I was younger then, this is probably 10, 15 years ago, and I'm like, 'Tom, I don't want to be short of the runway money-wise. Because we don't know exactly when you're going to die, or whether, if you're that outlier, you live to 90, not 77 as you expect.' And so it was this tension he and I had. It was a productive tension, trying to land that airplane on an aircraft carrier, on a plan that was moving all over the place. And ultimately he didn't die with zero, but we spent down a lot of money and he was actually relatively accurate on his longevity.

Roger: This is the kind of tension that has to be managed. Being more informed about longevity doesn't mean that you just assume you're going to die early and go crazy. You've still got to manage that. And that's why we need to be agile about it. I think this is probably one of the most underappreciated aspects of retirement planning that we all overlook, because in retirement planning it's always defined as: don't run out of money. Running out of life might be the higher probability for those that are less constrained or overfunded. Something to consider. We're going to continue this conversation, but I wanted to give you at least a protocol. And as I evolve that protocol for myself and our team, we'll share some of that on future episodes.

SMART SPRINT

USE A LONGEVITY CALCULATOR TO FORM YOUR BASELINE ASSUMPTION

Roger: And we're off to set a little baby step you can take in the next seven days to not just rock retirement, but rock life. In the next seven days, go to the American Society of Actuaries calculator, take a look at the probabilities, and come to a judgment call of whether you want to be conservative, moderate, or aggressive in your longevity estimate. You don't have to go down the rabbit hole here. It's just starting to understand these probabilities to factor into your planning alongside all the financial probabilities.

Roger: Now one thing I want to mention that I didn't mention at the beginning: some of the assumptions behind the actuaries calculator build in the assumption that longevity improves over time, because that is true. Every year you live, your odds get a little bit better because you have one less year for something to happen. They have factored into that calculator that your longevity slowly increases because of medical advancements and the fact that you're aging. So it's a pretty reasonable calculator to use as a baseline. Life is finite, and that is a scary thing, but it also is a good focusing principle to make sure that we make the most of the only life we have.

ON THE BOOKSHELF

Roger: So now at the end of the show, I want to share two books that are on our bookshelves at the moment and one article related to the topic that we talked about.

Nichole: Hey listeners, this is Nichole. I just finished reading Fellowship of the Ring for the first time since I originally read it in college. Back in my early 20s when I read it and the movies were coming out, I thought it was really slow and I didn't understand the big deal. Surprise, now in my 40s I have either become a more patient reader or slower is cool to me, I don't know. I really liked it this time around. I have really enjoyed going back and rereading some classic books, especially things I was assigned in high school that maybe I didn't have the life perspective to appreciate, and now I'm finding that as an older adult I do. So I hope that you enjoy it as well. I'd say a four-star read for me.

Roger: I love that idea of going back, Nichole, and reading books that we either read in high school and didn't care about, we just had to get through, or that we just didn't get because we weren't in that life stage. I've been reading a lot of classics. I have not read The Hobbit or that whole series, but great review. As an example, the book I am almost finished with, and I'll share it, is Alice in Wonderland, which is actually a relatively short book. It's a good read. I remember seeing the movie ages ago but I've never read the book. I thought, I wonder, I'll read the book. It follows and tracks pretty well.

Roger: Two books that are on our bookshelves at the moment. And one article I want to encourage you to read, we'll put a link to this in our Noodle, is by Dan Haylett of the Humans vs. Retirement podcast. Dan and I are good friends. We've presented at conferences together, we've collaborated, and I think he's been on the show once or twice. He wrote an article related to how many good years do we actually have? He's really evolved as a writer, he's writing on Substack now. In addition, he has the Humans vs. Retirement podcast. We'll put a link to that article in the Noodle. It relates to the trade-offs that we might be giving up if we're not thoughtful on our longevity assumptions.

Roger: All right. I look forward to chatting next week. We're in May already, and we're going to do a month-long series on right-sizing your stuff in retirement, or decluttering for retirement. We're going to explore that for a month, as well as answer some of your questions.

The opinions voiced in this podcast are for general information only and not intended to provide specific advice or recommendations for any individual. All performance references are historical and do not guarantee future results. All indices are unmanaged and cannot be invested in directly. Make sure you consult your legal, tax or financial advisor before making any decisions. This podcast may include testimonials and or endorsements.