A New Tool For Considering Life Expectancy In Retirement Planning?
A reader asked for my two cents on this link from Barron's about the impact on retirement planning caused by the potential for increased longevity. Part of the article was devoted to the theory that our faces can be biomarkers for overall aging. There's even software that tries to assess facial aging for longevity that at least one financial planning firm uses (per the article).
This is an area of planning that I have long been interested in, writing many years ago that if you're 60 or older and at least one of your parents is still alive you need to plan (financially) for being around for a long time. I did not realize back then how important behaviors (diet and exercise) were to the equation, I knew they were important just not how important. I don't know how reliable a facial assessment could be as it could capture genetics, it could also capture behaviors (smoking is of course bad in almost limitless ways and appears to me to make faces look older) but it seems unlikely that merely looking young explains a large number of outcome but great if it does.
The upside of living longer is that you live longer but there is a downside which is your retirement plan potentially needs to sustain for a much longer period. That's not really a true downside as opposed to a obstacle to consider and then mitigate. Complicating the mitigation is the reality of interest rates as cited by Jim Grant; "When long-dated Treasuries fetched 5%, you earned $50,000 on $1 million of savings. At a yield of 2.5%, you earn $25,000 on the same $1 million." Anyone thinking they can get by on the 4% rule would have an easier time doing it, collecting 5% from Treasuries.
The article makes a reference to healthspan which is how long we are able-bodied as opposed to lifespan. I've become increasingly interested in behavioral ways to try to improve healthspan. One positive outcome of increased healthspan is spending less money on medication for things like Type 2 diabetes. The estimates of how many people are afflicted with this are all over the place, this link says about half the adult population has it or is pre-diabetic plus however many undiagnosed cases there might be. There's been a lot of attention placed on the skyrocketing costs of insulin.
Having T2D probably isn't consistent with living to 100 but the bigger point is being healthy enough to avoid spending on money on medication that treats chronic maladies. The longer you can delay, or better yet avoid entirely, this sort of medical spending the less the burden you place on your financial plan. That may seem obvious but it is still worth keeping on the front burner.
Short post as I try to get back on schedule after getting back from Australia yesterday. We packed a lot in as we usually do, we saw a lot of Sydney and did a lot of hiking out in the mountains. We're fortunate to be able to take the trip at all and fortunate to be physically able to put in so many miles walking the streets and hitting the trails and while we are young (53 and 47), no matter how old you are you know people your age who have physical limitations due to chronic health problems. That and the financial implications are hopefully enough motivation for increased health awareness. Here are some pictures;