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An Actuary’s Take on Longevity and Early Retirement

longevity feature

Today’s guest comes someone who loves numbers even more than I do. As an actuary, the guy practically bathes in numbers. He also spends a lot of time contemplating heartwarming topics like life expectancy and the factors that alter it.

The Actuary on FIRE (clever name!) is not to be confused with actually on fire; but instead is an actuary with a family on the east coast and he’s revving up his game after a recent financially indolent interlude.

So, how does an actuary approach early retirement?


Death. When life has slipped through your fingers like so many grains of sand, and your own finite mortality is brought to an emphatic end and has been absorbed by the cosmic consciousness, then your path to financial independence will truly be over.

Ooooh, that was a downer, huh?

But the fact is that I am building my knowledge of life expectancy into my financial independence plans and so should you. As an actuary, one aspect that I share with medical professionals is a more intimate acquaintance with health and death than the general population. I analyze death rates to advise pension plans on how much money they need to set aside to meet their future promises. Do you know the key factors that impact that assumption?

  • Gender. Women live longer than guys. Dunno why, I hope a reader can tell me why.
  • Income. This is a good socio-economic indicator and higher earners live longer. Higher earners are more likely to be well educated, have access to quality healthcare and a good diet, and this is reflected in materially higher life expectancies.
  • Health. Do I really need to tell you that smoking kills you? An active lifestyle has a demonstrably better impact on your lifespan.
  • To an extent, there are other factors such as where you live, race, and ethnicity, but these factors tend to be captured in the above.


How Long Are We Going to Live?


So how long are we all going to live? According to the CIA World Factbook, the life expectancy in the United States is currently 79.8, and has the 48th highest figure in the world. Monaco has the highest with a life expectancy almost 10 years higher at 89.5 years. But this is a massive understatement for a couple of reasons.

  • The figures above are life expectancy at birth. I’m assuming all my readers are seasoned adults and well beyond initial birth years, and consequently you will have survived your infant years and early teenage years. These are key times of elevated mortality. You should therefore consider future life expectancy from your current age not from birth.
  • Those numbers omit future improvements in mortality. This is a key item to consider.


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Future Improvements


Death rates have not been static throughout history; for example, the mean life expectancy of Kings of England from 1000 A.D. to 1600 A.D. was only 48 years, so can you imagine what it was like for the general serfs?

But in recent decades the acceleration has been dramatic. In the extreme, a well-known gerontologist Aubrey de Grey from Cambridge University in the UK has proclaimed that the first human to live to 1000 is alive today. (If that person has FIREd then I hope they are sitting on a pretty big egg!).

When future improvement in life expectancy outpaces birth rates, then the result is an aging population and the following chart shows the projected growth in world centenarians. There is no doubt that we are living longer, and this will continue for the foreseeable future, and within a few decades it will be relatively common to live to 100.


Growth in number of centenarians
A ski slope of centenarians!


So C’mon, How Long Will We Live?

We need a way of measuring life expectancy from our current age incorporating the factors I describe previously. Well, you’re in luck – those clever folk in the actuarial profession has provided a handy tool, the Longevity Illustrator. You simply enter some personal details along with a partner’s details and you can obtain some fancy charts.

The first chart below shows my probability of attaining a future age along with my wife. Since my wife is female and I’m male (no gender assumptions here!) she has a better probability of living to future ages than me. I have an 11% chance of making it to 100 and she has a staggeringly high chance at 17%. A 1 in 6 chance – would you have guessed that high?  Those are interesting results but not that useful for financial planning.


Probability of life expectancy
If you were going to bet, you would bet on my wife surviving – yeah?


However the next chart puts things in the perspective of a planning horizon. I have looked at figures for my anticipated FIRE date at age 50. I can see below that we have a 50% chance of both living 33 more years together and in fact there is an even chance of 50% that either of us will live 46 years. That is a long time and around 7-8 business cycles. Over that time you will likely see most combinations of high growth, low growth, inflation, wars, market crashes and more. So you need to be prepared.


Future planning horizon
Decades stretching out in front of us (hopefully!)


Financial impact of additional years of life


I’m constantly thinking about how much money I need in order to be self-sufficient. The above analysis is helpful, so let’s consider the following example. Suppose I want to be 90% certain that I can cover annual expenses for either of my wife and I. From the chart above this will require covering a minimum of 55 future years of expenses. If my annual expenses are $100,000 (say) and I assume a 4% real rate of return then the capital amount required is $2.2m.

I might want to add on another year as a buffer. This is easy to do, I just find the present value of $100,000 payable 55 years in the future. i.e. what is the sum now that rolls up to $100,000 in 55 years? It is just $12,000. That is the power of compounding. A more substantial buffer would not be too high in relative terms, and so the difference between being 90% certain and almost 100% certain is really not that much when expressed in todays’ dollars.

If you are planning to retire in your 30s, 40s or even 50s, then the potential future timespan can become very large and stretch into multiples of decades. Financially we have rarely seen such long planning horizons. Companies plan for a few years, governments less than a decade, and insurers and pension funds a few decades. The longest maturity financial instrument in the US is currently 30 years, so the current batch of super-early retirees are pioneers in uncharted waters that are hopefully sailing into the sunset and not over the edge of the world!


[PoF: I like the different approach of calculating what’s needed for one more year of living. Usually, when we think about needing more, it’s saving another $250,000 to cover a $10,000 annual expense, based on the 4% rule.

Turning thigs around, calculating the current cost of one more year at the end of life allows us to take advantage of compounding, and using real returns accounts for inflation. $12,000 now for the spending power of $100,000 in today’s dollars later? I’ll take 10!

If you enjoyed the post, visit Actuary on FIRE for more from the numbers guy.]



Do you think you will live to 1000? And if so how will you remain financially solvent? Have you given any thought to life expectancy and built it into your projections? Let me know, I would love to hear about it.



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44 thoughts on “An Actuary’s Take on Longevity and Early Retirement”

  1. Subscribe to get more great content like this, an awesome spreadsheet, and more!
  2. This disturbed my weekend, I was pestering my hubby to do those online ‘how long will you live for’ quizzes haha. It made me want to push the FIRE number higher since…I don’t know I’m pretty healthy and female…I could be the 1000 year old grandma, watch out!

  3. Nice topic and post. I partly chose Oncology as a career because when I was in medical school the cardiac death curve was going to be surpassed by the cancer death curve. We are bending the cancer curve down, albeit slowly. AoF, I wonder, what are adults dying of mostly now and what do you think they will die of 30-50 years from now when many of this blogs readers will be dying?

    I have read that neurological disease will become more prevalent as cancer care improves. I can attest that I have more patients living with metastatic disease and dying of non-cancer causes than I did 10 years ago early in my career.

    • aGoodLifeMD,
      In my work I tend to deal with the macro drivers in a pretty homogeneous bucket – like “healthcare advances”. And I don’t dive into the underlying causes. That’s a whole new rabbit hole. So I’m not so familiar with that, but the Longevity Bulletin is a great resource that is at the intersection between actuarial/medical/big-data thought. It’s got articles about anti-microbial resistance for example.
      So sorry I can’t answer directly, but my best guess is that computer driven cars will dramatically improve survival rates!

  4. Super interesting article.

    I was talking to my financial advisor about the fuzziness of retirement estimates. I’m on a couple other FIRE forums and it’s interesting to see the variability in estimates. On the non Doc forums the 4% or 4.5% “rule” dominates and FIRE is typically calculated on those numbers, often using a calculator like FIREcalc. The problem with this approach is “past performance does not represent future results”. FIREcaclc and the 4% rule are historically based estimates. On the Doc forums 3% is a more common thumbnail rule.

    I have also used tools called QPP (now defunct) and another similar calculator Optimal Retirement Planner (which is still active but not as granular as QPP was). These use Monte Carlo engines to generate statistically forward looking predictions. Monte Carlo analysis is used everywhere in business and engineering to understand likely modes of failure in economic, logistic and structural systems and models. These engines try to generate statistical error signals and then look and see when the model breaks (or doesn’t). It also reports out a (your model failed 1 time out of 100) kind data point.

    My advisor feels either approach has its issues, the first is historical models “past performance… et al) are not really predictive but presumptive, and the second is the Monte Carlo engines seem to get dimmer and dimmer in terms of what is signal and what is noise as longevity happens. He thinks Monte Carlo tends to peter out predictively after about 25 years as the signal gets lost in the noise. Yet we are talking 50-60 year time horizons.

    AoF do you have an opinion on this dilemma? Should we “re-retire” in terms of portfolio analysis every 10 years based on where we stand in a given 10 year epoch? How would this fit with the 1000 year lifespan?

    I realize this may deviate a bit from your area of expertise, but I bet you have an opinion. Are we pretending we know what we are talking about?


    • Gasem,

      With these huge timespans of decades stretching out in front of us then I think we are pretending we know what we are talking about! But we do have a lot of historical information about the markets and show a huge variety of environments: boom, bust, inflation, global warfare etc. So we can see many stresses and how that might impact our plans. So I put quite a large weight on the past.

      With regard to Monte Carlo simulations of the future I am less jazzed. You have to build in certain model parameters such as mean reversion of interest rates, and valuation models of equities. These introduce certain biases and make the simulations less useful IMO. I’ve found that Monte Carlo simulations just lead you to a 60/40 portfolio in almost every situation!

      I like your phrase of “re-retiring” every 10 years. I think that is smart. But maybe more frequent. Every 3-5 years re-assess your investment strategy and spending model and make course-corrections. That’s perhaps the best we can do.
      Thanks for the question.

      • There’s a very important bit of information there if the Monte Carlo’s all lead to 60/40. It could be model bias, but it could also be at 60/40 you are touching the line describing the efficient frontier, as in modern portfolio theory, based on asset mix, in other words the yellow brick road into the future. I’m not saying this is the case, but interesting. My personal impression is Monte Carlo over estimates safe withdrawal.

        I think you should re-retire every time there is a natural change in epoch. In my case, I am back dooring Roth’s till I’m 70. I’m living off 5 years of cash while that is happening, so my back door is my only taxable activity. At 70 I will RMD and claim SS and the present epoch will conclude and I will have to figure out how to efficiently fund the next epoch, likely another 5 years. During the 5 years since I’m cash heavy (actually short term muni bond heavy so I have some inflation protection) I start out “bond heavy” (55:45) pass through 60:40 as I spend the money and then wind up stock heavy maybe 70:30 at the end depending on capital appreciation, only to re-retire again as the new epic commences.

        With each epoch I inch closer to loss of respiration. The average bear market lasts 16 months so it’s likely my muni bond cash flow will never be touched by the bear, and if I run out of money during a bear I can just slice off a dab to tide me over till it’s safe to rebalance, and tax loss harvest in the meantime.

        This portfolio therefore naturally rebalances itself in terms of risk from 55:45 to 70:30 during an epoch, is always in capital appreciation mode and is unperturbed by cash flow (as in SORR drag, yes I read your website, thanks for the insight), during an epoch. I also built in some inflation protection, but that’s a bit too much detail.


        • Gasem – that’s a super-detailed plan, thanks for that. Looks like you are all set!
          [I was being a bit tongue in cheek with 60/40. I just meant that a MC analysis almost always leads to a balanced portfolio and doesn’t provide a whole lot of insight. I dont’ intend that everyone reading this flips over to a 60/40 strategy…]

  5. Nice article. One point that shouldn’t be missed is that while mortality (how long we’re living) is improving, the jury is still out on whether morbidity (how healthy we are) is improving as well. That can make a big difference when planning for retirement.

    When you don’t consider morbidity, you’re implicitly assuming you’ll just drop dead one day. Sadly, for most people it’s a long slow decline that advances in medicine are just making longer.

    If you aren’t planning for a long slow decline, you’re probably underestimating your true retirement needs. The average stay in a nursing home is 2-3 years at a cost north of $80k per year. Any sort of cognitive issues, e.g. Alzheimer’s, and you could be looking at a decade of care.

    Those sort of numbers will blow a hole in even the best restirement plans. And if that weren’t bad enough, your options for laying off the morbidity risk (via a long term care policy) are much more limited than laying off the morality/longevity risk (via an annuity).

    • You make some excellent points, particularly regarding morbidity. Life after 90 doesn’t look so good for most nonegenarians that I’ve encountered.

      I would like to point out, though, that if you plan for a six-figure spend (i.e. retire with $3 million or more for a 3.33% withdrawal rate), you’re pretty much self insured for long-term care. Two in the nursing home simultaneously could be an issue, but medicaid has been known to come to the rescue for those who truly run out of money.


      • That’s true. Being able to self insure your long term care is the ultimate goal. Getting there may just require some more conservative assumptions in your retirement planning.

        And I’d caution against assuming Medicaid will backstop your long term care planning as well. You truly have to spend down all your assets first, potentially leaving your spouse with little to nothing to support themselves after you’re gone. You’ll also be competing for a limited number of Medicaid-eligible beds with everyone else, meaning you could find yourself at the end of a very long line.

    • John – thanks for the comment, however not sure I agree that morbidity rates are not improving. This study by the Society of Actuaries shows big improvements from 1984-2004. With those improvements pretty stark for very old age 95+.
      Like the look of your blog BTW, I shall take a deeper look.

  6. You provide a pretty compelling case for early retirees to go with a 3% withdrawal rate. Have you done any calculations on increasing the rate later in life to see how much would be left?

    • Jeff – make sure you look at Early Retirement Now’s series on safe withdrawal rates. That should give you all you need to know!

  7. Amy, I’m a demon at parties!
    The beauty of dollars at the end of your life is that they only cost 10-14cents now, depending on your age. So it’s pretty easy to get your head around that.

    (But not that palatable to governments wrestling with longevity strain on social security …)

  8. I just know you are a fun guy at parties right AoF? We have thought of at least one of us living to 90. I hadn’t thought too much about the money needed then in today’s dollars. Seems like an easier way to think about it though, thanks.

  9. We’re in FIRE mode already with high probability of our money lasting until age 97. That estimation model shows that my wife has a 20% chance of living to 100, so perhaps I’ll re-run some numbers with a few years added and consider how that might change things.

    • A 20% chance is pretty high – focusses the mind I guess. You’re right add in a buffer and calculate what that is. Thanks for stopping by Brad.

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  11. Love this post. Huge fan of Aubrey deGrey and Ray Kurzweil. I’m 36 and feel like I have a 50/50 shot of living long enough that I might reach the point of being able to live indefinitely. It is because of this belief that I plan on working part time (3 days a week) as long as I can stand it… probably at least until I’m 70. It would probably help keep my mind sharp as well. I can live with 4 day weekends in lieu of full retirement.

    • Really? I’m not familiar with deGrey & Kurzweil, but that sounds pretty far-fetched to me. Do they propose a telomere repair process? Half-cyborgs? Fountain of youth?

      • You can YouTube lots of videos on both of them. Kurzweil works for google and is a famous inventor. He has made lots of “far-fetched” predictions that have turned into reality. A true genius. Written many books. He thinks immortality may be plausible by the late 2030s and certainly by the 2040s. I’m thinking it will take longer but he makes very compelling arguments citing the exponential growth of information technology over the last 100 years. Exponential curves start out very slow until a critical point is reached… you might not even realize it’s happening… then BAM!

      • I think it’s something like being able to make micro-robots than can be injected by the thousands into the bloodstream to repair the body from within. Certainly not inconceivable (who would have thought of smartphones 20 years ago)?

        But I like the idea of some part-time or freelance work indefinitely. Just my observation, but I think it helps keep people grounded. For example, I know fully retired people that will call you on your cellphone at 1030 AM on a workday just to chat, disconnected from the fact that you work. I don’t know if it’s causally connected to their retirement, but I get that impression.

  12. AoF: Thanks for those fascinating numbers. We are planning with a 60-year horizon (husband 44yo, wife 35yo when retiring), and even that might be a few years short!

    Quick question: Where can a mere mortal (pardon the pun) like me find the actuarial data like the separate and joint survival probabilities for our case?

    • ERN – you’re right even 60 years might be too short. Especially for your wife. Fun fact – for a 65 year old couple there is a 20% chance that the wife outlives the husband by 15+ years!

      Wow I have never been asked for mortality data! Here is a link below to the latest improvement scale “MP-2015”. You also need the latest base table “RP2014”. There is a link on the right to an excel implementation tool. I played with it for 5 minutes and it did not look particularly user-friendly. So drop me a note if you need anything else to help. When I did my exams we had to use paper tables and calculate all the figures by hand – happy days!

  13. Great tool! It would be nice if there was more gradient between health statuses, but perhaps the underlying data doesn’t support it.

    I have always been a saver so we are in good shape in that respect. I don’t have a mind towards the RE of FIRE, especially now that I know I’ll likely to live well into my 80s… I mean, how many cruises can a man take? I’ll let you know. 🙂

    My plan is more towards living as we are (with additional travel) and being able to do so without dipping into the principle in an average year. Essentially, being able to fund retirement forever. There are different numbers out there, but I think 3% is a good number to shoot for.

    When we are ~90 and the grand kids get to college, if we have a few million bucks still sitting around we can help them pay for college… which will likely cost a million bucks for a 4 year ride by then!

    • You’re right preserving principle is a good way to reduce this risk. If you have enough to limit to 3% then you should be in pretty good shape if you don’t have too crushing sequence of returns. Personally I don’t think I”ll be doing that, but I have some DB plan benefits coming through later in life, so I am pretty relaxed about spendown.

  14. Living in a town full of retirees has given me hope for a healthy life into my 90s. It’s possible and I see it most days. I suspect I will have to keep living here in Northern Cal to drink from the fountain of youth.

    I do agree though, without a healthy body and mind it won’t be worth it. So time to start eating salads.

    • And from a financial perspective alone it’s really worth being in good health, since poor health is gonna cost so much. So a long life in poor health is really undesirable from all angles.

  15. I hope to make it into my 90s. I think we’re plateauing on what is possible with aging until we get to something like cyborgs. In my case there are folks in my family who died in their forties, seventies, and nineties due to medical conditions. I can’t venture to guess how I’ll turn out.

  16. Wow this is an interesting topic. We all face death at one point in our lives, but no one really wants to talk about it.

    My hubby is 5 years older than me and sometimes wonders if one day I will be all alone because he will leave the world first. >.<

    • Yeah, talking about death and estate planning is still a big taboo. My dad died without a will and that was quite a pain, so it is a must-do thing. Even simple things like direction about the type of funeral he would have wanted would have saved a lot of angst. So I have given quite a lot of direction for myself, as I don’t want my heirs to be having to worry about stuff like that.

  17. Unless we crack the mystery of aging, I am not sure I’d want to live much past 100. I met an obscenely healthy 99-year-old couple yesterday, yet they both could barely walk, see, and hear. Does anyone really want to live in that state for another 900 years? If age 100 in the future is more like 30 today, however, sign me up for immortality.

    When I run projections in a calculator such as FIRECALC, it can provide me a 100% chance of success for 30, 60, 80, or even 100 years with a 3% withdrawal rate. If one is conservative enough, money can live forever too!

    • People who believe in and talk about radical life extension do not assume you will be in a poor state of health for 900 years. If it’s possible to live to 1000 some day, it will be as a biological 25 year old in perpetuity. I’d sign up for that!

      • The one impact of huge improvements in Japan’s life expectancy is the large number of physicians devoted now solely to gerontology specific issues. Japan has an extraordinary number of centenarians, and consequently are devoting large resources to the research and care of extreme old age.
        So it almost becomes self-perpetuating. The longer we age, the more resources we throw at it, resulting in… more longevity.

    • That’s true, a conservative strategy is a great mitigant to longevity risk. But I guess the longer you push out the timescale the more chance for you to see a really nasty economic tail event. In simple terms, you’re more likely to see a major war and recession in a 60 year timespan than only 30 years.

  18. Wow, that whole death bit was enough to wake me up this morning. Quite sobering.

    I can’t say I’ll be one to make it to 1,000, but I am female with a family history of longevity (my dad made it to 90 on a meat and potatoes and ice cream diet!), so hopefully I have time on my side.

    Since we didn’t get FIRE’d up until our later 30s, we won’t have quite as many decades to plan for as someone who was smart enough to jump on this right out of college. That being said, trying to figure out the magic number based on longer life spans is a great problem to have. Cheers to being alive today!

    Mrs. Mad Money Monster

    • Thanks for dropping by Triple-M! You might be the one to live to 1,000, but that is going to take some real financial planning….


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