Take a second and think to yourself, how long do you think you will live?  I realize it’s a morose thought, but honestly what age do you think you’ll pass away?  You may consider your current health, your family history or a variety of other factors to make the estimation.  When I ask investors what age they believe they will live to, an overwhelming number of respondents estimate somewhere between their late 70s and early 80s.  Very rarely do I ever hear anyone say they will live into their 90s.

But did you know the life expectancy for the average non-smoking American couple is 92 years old according to the Society of Actuaries?

Let that sink in.

This means there is a 50% chance that you or your spouse is going to be alive (and need income mind you) at 92 years of age.  And this is just the average non-smoking couple.  But, taking this to another level, it’s likely that if you are reading this you are probably not the average couple.  You’ve probably made better than average income, received better healthcare, worked a less physically demanding job, and taken better care of yourself.

Additional data from an article in USA Today based on data from the Society of Actuaries:

There’s a 25% chance that a 65-year-old man will live to 93; a 25% chance that a 65-year-old woman will live to 96; and for a couple 65 years old, there’s a 25% chance that the surviving spouse lives to 98, according to SOA projections.

Many people would not consider a 25% chance of something happening to be insignificant.  So I’ll restate; there is a 25% chance that the surviving spouse lives to age 98.  That being the case, it’s certainly possible (probable) that you and your spouse have a joint life expectancy that extends well beyond age 92.

Consider what this means for your portfolio income plans.  Your portfolio will potentially need to support your lifestyle for over 30 years.

Based on my very informal ongoing survey, it’s likely that people are drastically underestimating how long they’ll live.  And because longevity and inflation risk are inextricably linked, most retirees must also drastically underestimate the potential impact of inflation on their retirement.

As far as the cost of living goes, what do you think is likely to happen over the next 30+ years?  Let’s look at what’s occurred over the last 30 years for some insight.

Average Cost of Various Goods in 1988:

Postage Stamp: $0.24

Dozen Eggs: $0.65

A Gallon of Gas: $0.91

Gallon 2% Milk: $1.89

Movie Ticket: $3.50

Ford Taurus: $9,996

*Data from The People’s History

Cost of the Same Goods in 2018:

Postage Stamp: $0.49 (2.41% annual compounding increase)

Dozen Eggs: $2.38 (4.42% annual compounding increase)

A Gallon of Gas: $2.94 (3.99 % annual compounding increase)

Gallon 2% Milk: $3.18 (1.75% annual compounding increase)

Movie Ticket: $11.75 (4.12% annual compounding increase)

Ford Taurus: $27,690 (3.45% annual compounding increase)

*This Data is from Numbeo.com and Ford’s website.

The average general inflation rate for the period from 1988 to 2017 was 2.54%.  But as you can see above, the cost of many goods and…

This article was sourced from the Retirement Field Guide.

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