A new online tool from the American Academy of Actuaries and the Society of Actuaries aims to help consumers and advisors estimate how long of a retirement they may need to plan for. The Longevity Illustrator is available for anyone to use and generates three different illustrations of longevity.
After users enter some basic data, the Illustrator displays the probability that a user will live to a certain age range; a planning horizon; and the probability that the user will live a specified number of years.
“The idea of making an interactive Actuaries Longevity Illustrator available as a public service began several years ago when we noticed that retirees, and those planning for their retirement, did not have access to information that objectively breaks down the nature of longevity risk that can be readily understood both from a conceptual standpoint and operationally for those who are considering retirement income options,” Ted Goldman, senior pension fellow of the Academy, said in a statement.
The results are based on limited data inputs from the user — birthdate, sex, whether the user smokes and one of three generic health descriptors: poor, average or excellent.
The Longevity Illustrator acknowledges those shortcomings and adds that the results are “based on average expectations that may or may not be appropriate to any one individual’s circumstances.”
The point isn’t to determine the most likely age at which a user might die, but to “familiarize you with the possible longevity for someone with your general age and health characteristics. With this awareness you can then consider strategies to manage lifetime income from a new perspective.”
“We designed the Actuaries Longevity Illustrator to help plan for the possibilities of surviving to a range of different ages both for individuals and couples,” Andrew Peterson, senior staff fellow of retirement systems at the SOA, said in a statement. “Life doesn’t fit into just one scenario or age to reach in retirement. Instead, people should plan for a variety of outcomes – living shorter or longer than expected.”
The Illustrator also allows users to input data for a second person to show how their longevity compares to their partner’s. Each of the probability illustrations generated by the Longevity Illustrator show the user’s estimated longevity, as well as that of their partner, the probability that both will survive to a certain point, and the probability that one of them will live to a certain point.
“An important point is that it is very likely one of you is going to outlive the other, and you must take this fact into account when making your retirement plans. You should also consider the chance that either of you may live much longer than your average life expectancy,” the Illustrator cautioned.
The Social Security Administration offers a life expectancy calculator with similar limitations. Using an investor’s sex and birthdate only, it estimates the remaining years and final age of the user at their current age, 62, their normal retirement age and 70.
— Read 5 Critical Issues That Will Make or Break an Aging America on ThinkAdvisor.