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.

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. 

Qualified Longevity Annuity Contracts

What is a qualified longevity annuity contract (QLAC)? And why should you care? 
Are you age 70 1/2 or older and facing Required Minimum Distributions (RMDs) from your retirement accounts? Not a bad problem to have! Too much money!
If you anticipate a longer than average lifespan and are receiving sufficient income from Social Security, pensions, and investment returns and "you'd rather not drain your IRA, because you worry about running short when you're older and health costs increase." Then consider a QLAC which "allow savers to defer distributions from a portion of their assets in IRAs or employer-sponsored qualified plans until as late as age 85." Mark Henricks explains that the purchase is irrevocable so you need to consult a trusted fiduciary (financial professional who must put your interests first and foremost) and preferably one who does not sell the product. Learn more at: https://www.thestreet.com/story/13663150/1/how-retirement-savers-are-stretching-their-iras-the-qlac-archipelago.html