Estimating Longevity

A major mistake in most retirement plans is underestimating how long retirement will last. Most people routinely underestimate the life expectancy for people their age. More importantly, life expectancy varies with income level. The higher your income in your 50s, the longer you are likely to live, and life expectancy has increased more for higher income people than for low income people.  You can see the details here. For example, a man born in 1940 could expect on average to live another 34.9 years if in his 50s he was among the richest 10%. But a man born in 1940 who was in the poorest 10% would live only another 24.2 years, a mere two years longer than a similar income person born in 1920.

The story is rather different for women. At every income level, for both those born in 1920 and 1940, women live longer than men. But for women, the longevity and income trends are even more striking. While the wealthiest women from the 1940s are living longer, the poorest 40% are seeing life expectancy decline from the previous generation.

“At the bottom of the distribution, life is not improving rapidly for women anymore,” said Mr. Bosworth. “Smoking stands out as a possibility. It’s much more common among women at lower income levels.”