How Life Expectancy Affects Retirement Planning
Morningstar contributor Mark Miller looks at longevity assumptions used most in retirement plans. Are they realistic?
Retirement plans revolve around two critical numbers: your retirement date and how long you will live past that point. It's possible to forecast or even control your retirement date--sometimes. But--to state the obvious--any date you pick for your mortality is just a guess, for most of us anyway.
Most financial advisers assume extreme longevity in their retirement plans as a way to "test" the odds of success against longevity risk. Clients often see illustrations assuming a lifespan of 95 or 100. And certainly, some of us will be fortunate enough to reach those lofty numbers.