Life Expectancy: The Most Important Variable in Retirement Planning

Life Expectancy - The Most Important Variable in Retirement Planning

Life Expectancy is a crucial variable to monitor when calculating the needs for a retirement fund. The age which you are expecting to get retired in and a calculated life expectancy (obviously, keeping all the health aspects into consideration). Often while scrolling through the Google results for “how much should you save for your retirement”, the two major bars you have to set are:

  1. At what age, you are expecting yourself to get retired?
  2. What is the estimated life expectancy of yours?

Frankly speaking, the second bar to set is quite tough if not impossible. Precision is something which is quite hard to gain on life expectancy or your projected age. However, to stabilize a fund that’ll keep you going well for such and such years, you need to determine how much monetary fund you would require that will keep you active for dash years of inactivity. Needless to say, the calculations can’t be made accurate or 100% precise but you can always put a good analytical game to use and then act accordingly.

In this article, let’s read why “Life Expectancy” factor becomes important while you calculate retirement funds.

Why Is Life Expectancy So Important?

Whenever the question arises, there are basically two kinds of fears that develop in people’s minds:

1. What if one gets to live more than he/she expected?

I.e. the possibility of an underestimated life expectancy. In this case, your funds might meet a shortage in the later years. For example, suppose if you decided to retire at an age of 58 and you estimate your projected age to be “70 years”. You will have to manage your funds such that you get to stretch your living for 12 long years without an active income.

Please note that it also includes all the health check-up, rents, travel, and other miscellaneous expenses.

2. What if one overestimates his/her projected case?

The matter of life and death is probably the most unpredictable notions in the world. One does not actually know what might come the very next moment. In this case, overestimation can cause inconvenience. Suppose, if one is predicting his/her survival age to be 68 years. Now, suppose if one gets to live for 60 years, wouldn’t the money in the savings fund go completely wasted?

These two reasons make financial experts believe that “life expectancy” and its accurate prediction is actually an important variable to consider.

Also read: #11 Best Passive Ways to Make Money While You Sleep.

How to Determine Life Expectancy?

We have already established the fact that calculating one’s life expectancy is not an easy task, is it? But, there’s always a way out. We can predict a bit accurately with a few tricks that you must read.

1. Consult generic tables:

Researchers have worked hard to finally be able to present to us a normalized table with which we can predict our estimated life expectancy. The table is based on a generalized current age scenario through which you can actually predict how many years you are left with (according to statistics, of course).

For example, if Mr. X is 45 years old, he can expect another 38 years to live. Moreover, 0.4167% chances say that he could die this year.

Needless to say, these predictions are not including lifestyle scenarios and other health-related concerns.

Also read: The Easiest Asset Allocation Method- 100 Minus Your Age Rule

2. Online Life Predicting Applications (More accurate):

As we have noticed that the former means of calculation wasn’t considering some of the crucial aspects that could alter a standard result. The variables include the family history of a specific disease, eating habits, and lifestyle scenarios. The online applications that predict life expectancy such as Living to “100 life expectancy calculator” (available on Apple Store and Play Store) can accurately estimate one’s life expectancy.

There are certain bars which can be manually adjusted as per the real-time scenario which helps in backing up the predicted result.

Not only that, but these applications have incredibly easy interfaces to work with. Moreover, these applications suggest you ways or two with which you can stretch your life expectancy. Adopting a healthier lifestyle always helps financially for all the health-related costs it saves I future.

Here is the link to the two popular online life expectancy calculator:


(Source: World Life Expectancy)

Your Own Life

There are more than 50% of the people in the world who plan for the future. No matter how interesting those pep talks seem that say; “live in the present, let future come as a surprise”, no sane person would “actually” follow the advice.

Us humans being rational thinkers always plan in advance which is quite great actually. Other than being able to make rent, pay for food, and commute freely, you too might have a list of long aspirations you want to fulfill in “future”. Keeping everything in mind, you need to save accordingly.

Let’s hope for the best and let’s prepare for the worst.

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