Oldest Known Person Dies at 118

The Associate Press reported (January 2023): 

"A French nun who was believed to be the world’s oldest person but had been reportedly growing weary of the burdens of age has died a few weeks before her 119th birthday."

Lucile Randon, known as Sister André, was born in the town of Ales, southern France, on Feb. 11, 1904, and lived through the two world wars.

So what does this have to do with you and your finances? You need to consider that one of the greatest risk you face in retirement is longevity risk... outliving your financial resources. Of course, Social Security will last as long as you do... as long as right-wing Republicans don't get their way to cut Social Security, Medicare and other support systems as they refuse to raise the debt ceiling to pay for the U.S.'s financial obligations, many incurred during Republican administrations. Refuse to raise the debt ceiling means refusing to pay our debts. The last time this happened Standard and Poors downgraded our country's credit rating, making it more expensive to borrow and reducing the value of the US dollar on international markets. 

What can you do to assess your longevity risk? Check out the longevity calculators mentioned on this blog. 

Longevity Risk: World's Oldest Person Dies at 119

 How long are you likely to live? Outliving your retirement resources is a potential risk for many Americans. Most retirement planning scenarios project a 30 year retirement span but what if you live past 100? 

According to The Wall Street Journal (4/26/22), the world's oldest verified individual, Kane Tanaka of Japan, born January 2, 1903, died April 19 at age 119! The next oldest living person is 118 year old Lucile Randon, a French nun born February 11, 1904! 

Estimating your longevity is one of the first steps in retirement planning. A variety of longevity calculators can help you estimate how long you are likely to live. 

How to Estimate Your Life Expectancy: https://money.usnews.com/money/retirement/articles/2016-03-21/how-to-estimate-your-life-expectancy

American Academy of Actuaries and Society of Actuaries, Actuaries Longevity Illustrator: https://www.longevityillustrator.org/

 Abaris How Long Will I Live? Developed by Professors at the University of Pennsylvania

https://www.myabaris.com/tools/life-expectancy-calculator-how-long-will-i-live/

Northwest Mutual Longevity calculator http://media.nmfn.com/tnetwork/lifespan/#0

Actuaries Longevity Illustrator: http://realdealretirement.com/toolsresources/lifestyle/ (The Longevity Illustrator is based on just 4 items; there are many factors that affect how long one might live.)

Remember that you have a 50% chance of living longer than the estimates provided.

Paying for long-term care

 It’s estimated that 50% to 60% of 65-year-olds will require some form of long-term care at some point in their lives, often in 80s or later. Physician  John Lim recommends considering an alternative to self-funding (often followed by Medicaid), traditional long term care insurance (LTCI), or hybrid policies (afford payouts even if you don't need LTC). (Check out links to these options in this searchable blog.)

Lim recommends deferred income annuities (DIAs), also known as longevity insurance or—if purchased with retirement account money—as a qualified longevity annuity contract. DIAs provide protection against outliving your assets, regardless of whether you need to pay for long term care or not. DIAs are also known as Qualified Longevity Annuity Contracts.

A DIA is a basic income annuity with one quirk: The annuity doesn’t pay out immediately, but only after a delay. For example, you could buy a DIA at age 50 or 60. Similar to a traditional income annuity, you would pay an insurance company a onetime lump-sum payment in return for a lifetime income. The quirk is that the income stream wouldn’t begin until late in life, perhaps age 75 or 80. Age 80 is when mental and physical problems are likely to arise, requiring care. 

"Because the annuity’s payout is deferred until age 75, mortality credits—the secret sauce of annuities—are maximized. Put bluntly, those who die before 75 don’t receive a cent, which leaves far more generous payouts for those who live longer than 75. These “survivors” are precisely the ones who face the greatest financial risks from long-term care and longevity." IF you need care before the DIA kicks in you can pay out of your Social Security and assets, confident that the DIA is available. Of course, there is the option that one dies before the DIA payout begins but living past one's expiration date is much more of a financial hazard.

Unlike insurance policies, income annuities (DIAs) don't require a medical exam which might preclude one's eligibility for buying LTCI. 

Many mid-life adults are faced with caring for and paying for elderly parents. A DIA could be the answer.

Check this blog's posts on the basics of annuities to fully understand the concept.

https://humbledollar.com/2022/03/paying-for-aging/

Will you need long term care in old age?

 "Seventeen percent of 65-year-olds will need no long-term care. Almost one-quarter will develop severe needs, requiring many hours of help for more than three years."

"Most older people will fall between those poles, with 22 percent having only minimal needs. The largest group, 38 percent, can expect moderate needs — like support while they recover from a heart attack, after which they can again function independently."

Tallying the Cost of Growing Older

 By Paula Span, writing for The New York Times

"married people are less likely to need extensive care than those who are single."

Time to start planning for potential cost but not necessarily with long term care insurance. Check out other related items in this blog.

How long are you likely to live? An important figure for retirement planning

"How often do you eat red meat? Do you exercise regularly? Cancer in your family? Did you go to college?"

"These questions – among the varied and complex predictors of longevity – are packed into a calculator that will estimate how long you could live. The calculator was created by Dr. Thomas Perls, an expert on longevity and the genetics of aging at Boston University."

Living to 100: https://livingto100.com/

"The Living to 100 Life Expectancy Calculator uses the most current and carefully researched medical and scientific data in order to estimate how old you will live to be. Most people score in their late eighties... how about you?"

"The calculator asks you 40 quick questions related to your health and family history, and takes about 10 minutes to complete. At the end, you will be asked to create an account to store your answers."

Thanks to the Squared Away Blog: https://squaredawayblog.bc.edu/squared-away/how-long-will-you-live-try-this/

The Longevity Factor

 Roberta W. McCain, maverick mother of Sen. John McCain, dies at age 108!

She took to the presidential campaign trail at 96 on behalf of her son, Sen. John McCain of Arizona.

One of the founders of REI equipment coop lived to age 107.

Are you considering the impact of living much longer than you planned for your retirement? Roberta McCain is a great example of the value of single premium immediate annuities to insure against running out of money before running out of breath. 

Your complete guide to a succesful and secure retirement

"Investment and personal finance experts Larry Swedroe and Kevin Grogan present uniquely comprehensive coverage of every important aspect you need to think about as you approach retirement, including:

Social Security, Medicare, investment planning strategy, portfolio maintenance, preparing your heirs, retirement issues faced by women, the threat of elder financial abuse, going beyond financials to think about your happiness, and much more.

These topics are explained with the help of specialists in each subject. And everything is based on the “science of investing” – evidenced with studies from peer-reviewed journals.

Overall, this adds up to a complete retirement guide, packed with the latest and best knowledge. Don’t enter your retirement without it."
https://www.goodreads.com/book/show/42925681-your-complete-guide-to-a-successful-secure-retirement 

Stocks are Risky; Pre-retirees and Retirees Must Consider your Time Horizon

The large drops in the stock market over past few days related to the coronavirus epidemic should be a wake up call to investors. Let's review some basic principles of investing.
Remember that your time horizon for retirement investing is the rest of your life and you may live to be 95 or 100!
Selling stocks when the market drops locks in permanent losses.
Stocks often rise and fall dramatically in very brief spurts in reaction to global events. Stock markets do NOT rise and fall in nice steady steps. Dramatic drops and increases are the norm. NO ONE can predict when these dramatic ups and downs will occur!
Stocks are investments for the long run. No money that you will need in the next five years should be invested in stocks. Funds needed in the short run should be set aside in safe places like savings, CDs, money market funds, I-bonds, T-bills, and corporate bonds.
The Bucket Approach to investing takes into consideration the time-related needs of investors. Money needed in the next 1-3 years (depending on your risk tolerance) should be in safe places that will not lose nominal value. Funds expected to be needed in 3-5 years can be invested conservatively in dividend paying stocks, high quality bonds, and other conservative investments.
Funds for the long run (over 5 years) should be invested for growth in the stock market.

This strategy is specific to the retirement decision for pre-retirees (within 5 years) and persons in retirement.

SO:
Investors in the accumulation phase and more than 5 years from retirement should review their asset allocation and rebalance yearly.
Investors nearing retirement should institute a bucket approach for their investments, even if they also have a pension.
Investors in retirement: the recent market plunge should be a wake-up call to carefully review your retirement income plan. DON'T PANIC! If you sell your stocks today your are locking in permanent losses. We went through this with the global financial meltdown in 2008-09. Have investors learned from that experience?

Benefits of a bucket approach:
Predictability and peace of mind.
You can tap assets and still generate portfolio growth. 
Considerations: 
You need to be disciplined about generating a set return sufficient to meet your retirement needs. 

Read all 3 articles below for slightly different perspectives on time horizons for the 3 buckets. 

See: How to Use the Bucket Approach to Make Your Retirement Savings Last by pete Woodring

https://www.kiplinger.com/article/retirement/T037-C032-S014-bucket-approach-make-your-retirement-savings-last.html
"The bucket approach is an effective way to mitigate sequence and longevity risk. The general idea is to set up three or more distribution “buckets,” with different asset classes and different time horizons for liquidation. Note that the time horizon for the 3 buckets will differ depending on the author. This article takes a very conservative approach by allocating stocks to time horizons of 10 years of more. 

The Pros and Cons of a Bucket Savings Strategy by Rebecca Lake https://money.usnews.com/investing/investing-101/articles/2017-11-10/the-pros-and-cons-of-a-bucket-savings-strategy Retirement investors should have "now," "soon" and "later" buckets.  "The bucket strategy can insulate your retirement portfolio from sequence risk and longevity risk. The former refers to the risk of earning lower or negative returns early on when withdrawing retirement assets. The latter simply means outliving your savings."

What Is The "Bucket" Approach Strategy To Retirement Income Planning? by Jamie Hopkins https://www.forbes.com/sites/jamiehopkins/2019/04/25/what-is-the-bucket-approach-strategy-to-retirement-income-planning/#7b09608539d6

 

Retirement Caregiver Crisis

A labor shortage in the caregiving market could have widespread implications for families. Nursing homes in Maine, the state with the oldest average age, are having to close down due to not being able to hire enough staff. Other nursing homes throughout the U.S. struggle with keeping qualified staff. This situation does not portend well for the massive baby boom generation that is reaching the period when they need assistance with daily living activities. Other nursing homes have lost accreditation due to resident abuse or neglect.
No one likes to think that they will need care in cold age but plenty of us boomers have had experience with dealing with aging parents and know the facts are we will likely need support. But who will be there to provide it?
 
This shortage could be readily alleviated if we were more friendly to immigrants who would love to have steady employment in the U.S.

Source: https://www.wealthmanagement.com/retirement-planning/retirement-caregiver-crisis

Quick and easy retirement calculator

Writing for The Squared Away Blog, one of my favorites, author Kim Blanton describes a new online tool from Vanguard to help near retirees and retirees figure out how long their savings will last. She explains the tool and reviews some of the limitations of online calculators. Read her blog:
https://squaredawayblog.bc.edu/squared-away/how-long-will-retirement-savings-last/
Keep in mind that the tool is designed to estimate how long personal savings will last and does not take into consideration any pensions or Social Security income. So when they ask how much do you spend each year, take these other sources of income into consideration.
Another factor is estimating how long you might live. The biggest risk for most retirees is living too long, the "longevity risk." Unless you have reason to expect a shorter than average life span, figure on living to 90 or 100. Yes, really!
remember, none of this is set in stone and during retirement, you need to make annual adjustments to spending depending on investment returns and other factors. 
Go directly to the calculator:
https://retirementplans.vanguard.com/VGApp/pe/pubeducation/calculators/RetirementNestEggCalc.jsf

How much to annuitize

A significant proportion of Americans are living longer than they anticipated. An income annuity is designed to protect against outliving one's assets. Mark Hulbert answers the question: "Do annuities have a place in your retirement portfolio?" Jeffrey Brown, Dean of the College of Business at the University of Illinois at Urbana-Champaign and director of the Retirement Research Center of the National Bureau of Economic Research describes the role of annuities: “the entire point of an annuity is to insure against longevity risk.”
"What is the right amount to allocate to annuities in your retirement portfolio? The answer, as you can imagine, depends on a whole host of assumptions."
"One clue comes from an analysis conducted by David Blanchett, head of retirement research at Morningstar. His focus was on deferred-income annuities, which differ from SPIAs in that their guaranteed payment begins at a later point. After analyzing more than 78,000 possible scenarios, each one of which represents a different series of assumptions, Blanchett found that the average optimal allocation across all scenarios was 30.52%."
https://www.marketwatch.com/story/do-annuities-have-a-place-in-your-retirement-portfolio-2018-11-14