The Retirement Plan Solution: The Reinvention of Defined Contribution

Chapter 2. More than You Ever Wanted to Know about Life Expectancy

We're living much longer than we used to. In this chapter we look at that simple statement in more detail. The reason it's relevant is that the longer we live after our income from work stops, the more we need to save during our working years to last through our post-work lifetime. As mentioned in the Introduction, for the average American couple these days, it's pretty much a 50–50 proposition that at least one member of the couple will survive to age 90.

WHAT IS "LIFE EXPECTANCY"?

The life expectancy of a group of people is the average number of future years of life expected to be lived by that group. The group is typically defined by age and gender. For example, if you were to define a group as "male Americans aged 65" and look up the relevant National Vital Statistics Report published in 2002,^[18] you would find that the average future expectancy for this group was 16.3 years. That means that, if you took, let's say, a group of 1,000 male Americans aged 65, randomly selected, they would have been expected (at the time—these estimates vary each year) to live for a total of 16,300 more years. How long would any one of them live? It's impossible to predict. Some would live a long time, perhaps more than 35 years. Some would die soon. Together, their individual life spans would be distributed over a wide range of time. But the average expectancy was then 16.3 years—and that's what people mean when they talk about the ...