Life Expectancy Time Horizon

Investment Time Horizon: Life Expectancy Retirement Planning

As you plan for your future retirement, life expectancy is a critical component that you need to consider. As overall lifespan continues to increase, you must strategically plan your finances so that you can enjoy and take advantage of your golden years.

Updated on Oct 15 2019


Life Expectancy and its Impact on Investing

As you plan for your future retirement, life expectancy is a critical component that you need to consider. As overall lifespan continues to increase, you must strategically plan your finances so that you can enjoy and take advantage of your golden years.

The Average Life Expectancy is Longer Than You May Think

With an abundance of new medical and technological advances, life expectancy is increasing. For example, according to the Bureau of Labor Statistics, the average life expectancy in America in 1850 was around 40 years. Today, life expectancy has almost doubled and will continue to rise. This means that you will need to increase your long-term investments more than previous generations.

Here are some reasons why life expectancy has risen and will continue to do so:

  • Modern medicine – Medical discoveries and immunizations have decreased or eradicated many deadly diseases. Antibiotics like penicillin and vaccines preventing polio, measles, etc. have helped to increase life expectancy. Preventative medicine and improved health screenings keep people healthier. 21st-century pharmaceuticals, advancements in surgeries, and expert medical practice enable us to live longer.

  • Improvements in mobility – Loss of mobility is a major factor when considering life expectancy. New technologies enable greater mobility so that we can live healthier, more active, and longer lives.

  • Innovation profit motive – Innovation fuels innovation. Healthcare and technology are continually evolving and there’s a huge demand in these markets. This incentivizes workers and companies to develop new ways to extend life expectancy through healthcare and technological advances.

According to World Bank, the average life expectancy in 2015 was 78.74 years and 81.3 years for American men and women respectively. The link below shows total life expectancies for Americans, based on current age. It is worth noting that half of the people in each bracket are expected to live longer because of these projections and ongoing medical advancements.

Factors such as current health and heredity can also cause individual life expectancies to vary widely. The bottom line is that you should prepare to live a long time and save enough money to maintain your lifestyle.

Average Live Expectancy

Current Age Life Expectancy
51 81
52 82
53 82
54 82
55 82
56 82
57 82
58 83
59 83
60 83
61 83
62 83
63 84
64 84
65 84
66 84
67 85
68 85
69 85
70 86
71 86
72 86
73 86
74 87
75 87
76 88
77 88
78 88
79 89
80 89
81 90
82 90
83 91
84 91
85 92
86 92
87 93
88 93
89 94
90 95

Source: 2009 U.S. Total Population Life Table (revised 01/06/2014), National Vital Statistics Reports, Volume 62, Number 7. Life expectancy rounded to the nearest year.

Many Seniors Have Not Prepared to Live Long Lives

Today’s aging baby boomers are reaching retirement age in record numbers and many have not saved enough for retirement. This is putting America in debt”by draining funds such as Social Security, Medicare and Medicaid.

Diligently planning your retirement income with investment time horizon and life expectancy in mind can help you predict the funds needed to last your lifetime. If you err on the longer side of your lifespan projection, you’ll be able to afford to retire when you want and live with the comforts you desire as you age.

Why Investment Time Horizon Is So Important

A bigger allocation of equities in your financial benchmark is necessary for longer time horizons. TIme horizon forecasting is key and should be considered along with other factors such as return expectations and cash flow needs. Setting financial goals to meet a longer time horizon and life expectancy will provide peace of mind and improved quality of life in retirement. Connect with a financial advisor today to get the help you need to prepare for your post-work life.

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