Life Expectancy Factor and Investment Time Horizon
Updated on Mar 11 2019
Life expectancy is a critical element in your investment time horizon and retirement planning. Many people are living longer, which means it is more crucial than ever before to strategically plan finances to enjoy and take advantage of your golden years.
The Average Life Expectancy is Longer Than You May Think
Life expectancy keeps increasing for many reasons, including medical and technological advances. Since the 1850s, the average life expectancy in America was around 40 years, according to the Bureau of Labor Statistics. Today life expectancy has almost doubled and is expected to keep increasing.
Here’s why the life expectancy factor keeps increasing:
Modern medicine – Medical discoveries and immunizations have decreased disease. Penicillin, the polio and MMR vaccine in addition to preventative medicine and better screening for cancers and heart disease means that people are healthier. Pharmaceuticals of the 21st century and other life-extending miracles, such as expert surgeons and medical staff and practices enable people in America—and all over the world—to live longer.
Improvements in mobility – Loss of mobility can be a major factor in shortening life expectancy. New technologies enable greater mobility for so that people can live healthier, more active and longer lives.
Innovation profit motive – Innovation fuels more innovation. Healthcare and technology are always evolving and there’s a huge demand in these markets – which creates incentive for people and companies to innovate and make new discoveries. These discoveries lead to further life-prolonging healthcare and technological advancements. In this way, profit motive and human evolution drive life-changing and life-extending innovations.
In 2015, according to World Bank data, the average life expectancy was 78.74 years for men and 81.3 years for women. The table below shows total life expectancies for Americans, based on current age. These are projections, which change as you get older as new equations are calculated based on life expectancies and other variables, such as expected health and fitness level for a population that is still living at a certain 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|
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
The human lifespan has been increasing over the last few centuries in the U.S. and people living longer has changed America. Today’s aging baby boomers are reaching retirement age in record numbers and many have not saved enough for retirement, which 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 project the funds needed to last your lifetime, and beyond. If you err a bit 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
Typically, the longer the time horizon, the more a bigger allocation of equities becomes appropriate in your financial benchmark. Time horizon forecasting is key and should be considered along with return expectations, cash flow needs and other factors. If you set financial goals to meet a longer time horizon and life expectancy, you’ll have more peace of mind and probably a better quality of life in retirement. Connect with a financial advisor today to get the help you need to prepare for retirement.
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