Longevity Risk Increases With Age

Insightful post by Wade Pfau on longevity risk:

What the figure shows, for a same-age couple, is their median remaining life expectancy for each age beyond 50. For a 50-year old couple, there is a 50% chance that at least one member of the couple will live at least for just under another 42 years to age 92. By the time they reach 75, there is a 50% chance that at least one will live for a little more than 17 more years to age 92. This is the age range where mortality starts to pick up. If both are still alive at age 92, there is a 50% change that at least one will live for at least 4.6 more years to 96.6, and so on.

What is also shown in the figure are the remaining life expectancies at the 90th and 10th percentiles as well. At 50, 10% of couples will see at least one spouse live for more than another 50.3 years, and 10% of couples will experience both spouses dying in less than 30.7 years. And so on.

What is important to highlight is that the relative gap between median life expectancy and the 90th percentile grows with age. This is because mortality rates are lower at younger ages, and the differences between the median and 90th percentiles only start to build up by staying alive at the higher ages.

So at age 50, 50% of couples will see someone live another 41.8 years, while 10% of couples will see someone live another 50.3 years. It’s not that big of difference, relatively speaking.

However, by age 100, for instance, the median remaining life expectancy is 2.1 years, while the 90th percentile is 5.7 years. This is a big relative difference. The implication is that a variable strategy in which withdrawal rates are guided by remaining life expectancy, which I think is an important component of developing an optimal strategy, become much more exposed to longevity risk at the higher ages.


As people become familiar with the basics of longevity risk they will naturally become increasingly serious about an effective savings and investment plan to build an adequate nest egg.  Furthermore, thinking about the very real possibility of living to 90+ can also temper the appetite for unsustainable spending patterns in retirement.

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