If you have an independent way of getting your own longevity estimate, you can adapt that online Actuaries table to fit your own circumstances.
In the previous post I quoted from the Actuaries website, with their explanation of the many factors that affect longevity. Remember? “These include: income, family history, geography, life style, occupation, current medical conditions, and ethnicity.” But these aspects aren’t taken into account explicitly as inputs; it’s the detail in the outputs that makes the website so useful.
One reader said: “I submitted a query on the site requesting more definition about what the different health grades look like, as it’s not clear to me what Excellent versus Average versus Poor is.” Quite so! Also, what if you’re a reader in a country other than US? You might be familiar with, or prefer to use, a longevity table published there. Or you may like a particular app on the internet that asks you lifestyle and health questions that get to the level of detail you prefer. Or perhaps, if you have a medical condition, your doctor has given you a personal life expectancy estimate. Whatever the reason, you may have your own independent starting point, your own 50% life expectancy estimate, and it’s different from the Actuaries 50% estimate.
Now what? How do you extend this independent starting point to deriving JLS estimates, 25% and 10% estimates, and whatever other longevity estimates you wish you had for planning purposes?
The trick is to tie together your personal independent estimate and the estimates contained in the Actuaries table. And it turns out to be quite simple to make that adjustment.
In essence, you take your own independent estimate, and fit it to the Actuaries estimates. By that I mean that you see what age your estimate corresponds to in the Actuaries estimate. Then continue with the Actuaries table as if you are an American of that “fitted” age. I’ll show you how to do this, below.
To save you some tedious work, I compiled a list of 50% life expectancies from the Actuaries website, for a non-smoker in average health. They’re shown in Table L 12.1.
Let me give you a couple of examples to show you how to use it.
Example 1: You’re a male and you have an independent life expectancy estimate of 14 years. It’s as if you are a male American non-smoker in average health aged 72 or 73.
Which age should you use, 72 or 73?
It really doesn’t matter. Remember that the numbers generated by this approach aren’t predictions, they’re approximations for you to use for planning purposes. Pick either 72 or 73 as your age for the purposes of the Actuaries table, and the resulting numbers are close enough for planning purposes.
Example 2: You’re a female and you have an independent life expectancy estimate of 12.5 years. It’s as if you are a female American non-smoker in average health aged 76, 77 or 78.
Again, it doesn’t matter, for planning purposes, which of those ages you use to get the Actuaries 50%, 25% and 10% longevity estimates.
All you need to do is find the age at which your independent longevity estimate matches one in the table. Then continue with the table as if you are an American of that age.
I have written about retirement planning before and some of that material also relates to topics or issues that are being discussed here. Where relevant I draw on material from three sources: The Retirement Plan Solution (co-authored with Bob Collie and Matt Smith, published by John Wiley & Sons, Inc., 2009), my foreword to Someday Rich (by Timothy Noonan and Matt Smith, also published by Wiley, 2012), and my occasional column The Art of Investment in the FT Money supplement of The Financial Times, published in the UK. I am grateful to the other authors and to The Financial Times for permission to use the material here.