Life Expectancy 101
Be better than 99% of the financial gooroos & Monty Hall
“You work 40 years, retire at 65 and live to the average life expectancy of 78. 40 years of work for 13 years of retirement.”
“But using my proven method you can retire early with enough to never run out through your expected lifetime.”
I see some form of this as an email or tweet nearly every week. And although the general premise is reasonable enough (retire wealthy and earlyish), nearly every other aspect of the statement is wrong.
I’d go so far as to say, anyone who has sent an email with the above statement should be disqualified from ever giving financial advice again because they showed an embarrassing inability to think and are setting up all their ‘doggies’ for failure by under-planning for retirement life expectancy by like a decade.
I’m sure there is a component of Baader-Meinhoff/Frequency Illusion since anytime someone talks about life expectancy it catches my attention. And I recognize my day job as an actuary makes the concepts of mortality very familiar to me.
And this is even a super common mistake you see in the general population. People google some form of ‘how long does average person live’ and gets some answer like the below:
78 years, see it says right there.
If you live to 65, you expect to have 13 years to live. If you live to 77 you can blow your money since you have 1 year to live. And if you live to 98, then you have -20 years to plan for…right?
Well in today’s post we are going to talk about life expectancy, what it means, why that is wrong, and a fun little example of contingencies that always blows everyone’s mind the first time they do it.