Live Long and Don’t Prosper?

Wealth Adviser Briefing: Live Long and Don’t Prosper?

By Brian Hershberg

Feb 23, 2017 5:30 am ET

Many retirees forecast their own life expectancy based on the longevity of those closest to them. This isn’t entirely misguided. After all, genetics and socioeconomic status play important roles in longevity, writes Derek Tharp, founder of Conscious Capital, for WSJ’s Experts blog.

But this information may also be misleading, he writes, and particularly for those who think they’ll live a short life. Why?

Due to phenomenon known as the “squaring” of the survival curve, individuals with the lowest longevity expectations may actually be the most prone to significantly outliving those expectations.

As it turns out, it hasn’t been an increase in the maximum age attained that is driving recent increases in life expectancy, but rather, an increase in the number of people living closer to their maximum age. In other words, more of us are growing older instead of all of us living longer.

From a retirement-planning perspective, the squaring of the survival curve means there’s little risk that someone who expects to live to 100 will drastically outlive their expectations. …

… But for those who only expect to live to 75, the financial consequences of living 20, 30, or even 40 years longer than they expect could be devastating.