Why The Decline In Life Expectancy Shouldn’t Affect Your Retirement Plans

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Average life expectancy in the U.S. declined by 1.5 years in 2020, according to a recent report from the Centers for Disease Control and Prevention.

That is believed to be the largest one-year decline in life expectancy since at least World War II. Life expectancy was 77.3 years in 2020, about the same level as in 2003.

Life expectancy should be a major factor in retirement planning. I often recommend that one of the first steps in developing a retirement plan is to assess the potential life expectancy of the retiree, and each spouse in a married couple. Many features of a plan are likely to be different when the plan assumes a 15-year retirement instead of one that’s 30 years or longer.

Despite the importance of life expectancy in a plan, I don’t recommend anyone change a retirement plan in response to this change in average life expectancy. It doesn’t matter if you’re already retired or still planning to retire.

Most of the decline in life expectancy in 2020 was attributed to the Covid-19 pandemic, drug overdoses (especially from opioids), homicides, and the usual chronic diseases.

Most of those factors aren’t likely to affect those who currently are retired or near retirement. They already survived the pandemic and probably are vaccinated from Covid-19. They also likely engage in activities that are low risk for contracting Covid-19 and are likely to continue doing so.

The increase in homicides tends to be concentrated in particular localities and age groups instead of being widespread.

So, if you didn’t die from Covid-19 in 2020 and don’t have a substance abuse problem, you didn’t contribute to the decline in average life expectancy in 2020. Your life expectancy probably isn’t any shorter than it was before 2020 unless you’ve received a new medical prognosis or there’s a major turn in the pandemic.

Most people misunderstand life expectancy data. The CDC tabulated the average life expectancy for the entire population of the U.S. That means about half the population is likely to live longer than the average, and a substantial percentage will live much longer than average.

Also, if you already are middle-aged, your life expectancy is higher than it was at birth. Plus, life expectancy is longer for people who have higher incomes and more education than the average for the population. That means most readers of forbes.com are likely to live beyond average life expectancy for the population.

While the CDC announcement might require some changes from public policy makers, most of you shouldn’t adjust your retirement plans. Unless you have good reason to believe you’re life expectancy is below average for your age group, your retirement plan still needs to protect you from the effects of living a long life.

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