Big Question in Retirement Planning: How Long Will I Live?

Summary

Podcast Summary

WSJ Your Money Briefing

Episode: Big Question in Retirement Planning: How Long Will I Live?
Date: February 28, 2020
Host: J.R. Whalen
Guest: Ann Tergeson (Wall Street Journal Reporter)

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Episode Overview

This episode explores a critical but challenging question in retirement planning: estimating how long you'll live. The conversation centers on how knowing your lifespan—or even making an educated guess—can dramatically affect how much money you should save for retirement. The discussion includes traditional methods for estimating life expectancy, the increasing influence of personalized and genetic data, and new tools designed to give individuals more tailored predictions. The importance of health span versus simply life span, and the implications for financial and healthcare planning, are also discussed.

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Key Discussion Points & Insights

1. Traditional Approaches to Life Expectancy

• Government Lifespan Tables: Financial advisors typically use standard life expectancy figures from government sources (IRS, Social Security Administration) to estimate retirement needs. These are usually based on broad averages such as gender and age.
  • Quote:

    "They might use an estimate for a man, you know, just by gender because women tend to outlive men of the same age."
    — Ann Tergeson [01:56]

• Margin for Safety: Advisors often add extra years to accommodate family history of longevity or simply to provide a safety cushion.

2. Personalized Data and Its Impact

• Beyond Chronological Age: Emerging tools incorporate personalized factors like income, wealth, education, and lifestyle, in addition to genetics.
  • Quote:

    "Academic research shows that people can be on very different trajectories depending on various characteristics that they might have."
    — Ann Tergeson [02:58]

• The Role of Genetics: While people often assume genetics play the biggest part, Ann shares that genetics only account for about 20% of longevity. Lifestyle and socio-economic factors generally play a bigger role.
  • Quote:

    "Scientific data shows that genetics typically account for about 20% of longevity."
    — Ann Tergeson [03:18]

  • Quote:

    "In the top 1% of the income distribution, men tend to live 15 years longer on average, than men who are in the bottom 1%. That's a really significant difference."
    — Ann Tergeson [03:41]

3. Lifestyle Factors

• Health Habits: Smoking, diet, exercise, healthcare access, and education level all significantly affect both lifespan and health span.
  • Quote:

    "Lifestyle is sort of a broad category. So that can also include, you know, how much income you have, because how much income you have might be correlated with how often you can go to the doctor..."
    — Ann Tergeson [04:30]

• Economic Access: Income and education lead to better health outcomes, such as more frequent doctor visits and higher adherence to medical advice.

4. New Tools and Alternative Ages

• Innovations in Longevity Prediction: Academics and startups are developing calculators that estimate "biological age" or "health age" versus mere chronological age.
  • These tools aim to provide individualized predictions.
  • Quote:

    "The idea here is to give people more individualized ideas of what their own potential lifespan will be."
    — Ann Tergeson [05:17]

5. Planning for Uncertainty

• Financial Risk: Because life expectancy is never certain, plans often include buffers for “unusually long” life to reduce the risk of outliving savings.
  • Quote:

    "Maybe you want to plan to live another 10 years because you want to have some cushion against the unlikely event that you live longer or that your spouse does."
    — Ann Tergeson [06:11]

6. Health Span vs. Life Span

• Medical and Long-Term Care Needs: Even with high life expectancy, the number of healthy years (health span) is crucial, as years of ill health can mean high healthcare and long-term care costs.
  • Quote:

    "It isn't necessarily how long am I going to live, but how many of those years are going to be spent healthy versus unhealthy?"
    — Ann Tergeson [07:19]

7. The Role of Genetic Testing (e.g., 23andMe)

• Startups and DNA Data: Some companies now analyze genetic data (like 23andMe results) to look for specific longevity genes (e.g., FOXO3) or Alzheimer’s risk factors.
  • Quote:

    "The company will take your 23andMe results and they'll analyze them for just a handful of genes, one of which is called the FOXO3 gene, which is associated with longevity."
    — Ann Tergeson [08:04]

• Limitations & Caveats: Even with “bad genes,” a healthy lifestyle can reduce disease risk, and genetic information is not destiny.
  • Quote:

    "There has to be that big caveat attached to this sort of genetic analysis. It can be helpful to people, but it's certainly not fate."
    — Ann Tergeson [08:46]

8. Randomness and Uncertainty

• No Absolute Answers: Despite more sophisticated tools, randomness—like accidents or unexpected illnesses—plays a big role.
  • Quote:

    "We can't, nobody can definitively tell you...you could— that old saying, I could just get hit by a bus at any moment."
    — Ann Tergeson [09:45]

• Final Takeaway: There are “too many random variables,” but more personalized data can help improve—if not perfect—retirement planning.

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Notable Quotes & Memorable Moments (with Timestamps)

• On genetics vs. lifestyle:

  "Scientific data shows that genetics typically account for about 20% of longevity."
  — Ann Tergeson [03:18]

• On the profound effect of income:

  "In the top 1% of the income distribution, men tend to live 15 years longer on average, than men who are in the bottom 1%. That's a really significant difference."
  — Ann Tergeson [03:41]

• On the misleading temptation of averages:

  "For a person who has very long lived relatives, who's sort of affluent, very well educated, that number could be low by a factor of a decade."
  — Ann Tergeson [05:43]

• On health span's impact:

  "It isn't necessarily how long am I going to live, but how many of those years are going to be spent healthy versus unhealthy?"
  — Ann Tergeson [07:19]

• On the uncertainty of predictions:

  "We can't, nobody can definitively tell you...you could— that old saying, I could just get hit by a bus at any moment."
  — Ann Tergeson [09:45]

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Timestamps of Important Segments

• [01:56] Traditional methods for setting life expectancy in financial planning
• [02:58] Genetics only explain a small part of longevity; income and education are key
• [04:30] Lifestyle, income, and education—how they interconnect to affect lifespan
• [05:17] The arrival of personalized life expectancy tools
• [06:11] The financial perils of outliving one's life expectancy
• [07:19] Health span as a key factor in retirement planning
• [08:04] How startups use genetic testing for better predictions—and their limitations
• [09:45] The issue of randomness and why absolute certainty is impossible

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Summary Takeaways

• Life expectancy estimates are crucial for retirement planning but are far from perfect.
• Traditional approaches are giving way to nuanced, individualized analyses incorporating genetics, income, education, and lifestyle.
• Genetics matter, but not as much as personal habits and social factors.
• New tools give better guidance but can't eliminate the unpredictability of life.
• Health span, or the number of healthy years, is as important as overall lifespan due to the cost of care.
• Even with modern tools, planning for a long life and adding a buffer is still wise.
• Ultimately, every prediction is an educated guess—prepare for uncertainty.

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Tone and Style:
The tone is practical, educational, and geared toward giving listeners actionable insights, reflecting both Ann Tergeson's measured, evidence-based approach and the helpful orientation of the WSJ Your Money Briefing.

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For more information and to explore the tools discussed, listeners are encouraged to research new longevity calculators and the role of personal data in financial planning.

Transcript

[Small Business Owner 1]

Access to affordable credit helps me pay my employees, but I don't really need it.

[Small Business Owner 2]

Inflation is killing me, but who cares? Big retailers are making record profits. That's why we support the Durbin Marshall credit card bill.

[Small Business Owner 1]

See banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Small Business Owner 2]

they need while increasing megastore profits. They deserve it, don't they?

[Electronic Payments Coalition Representative]

Tell Congress, stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition.

[J.R. Whalen]

Here's your Money briefing. I'm J.R. whalen at the Wall Street Journal in New York. They say age is just a number, but estimating how long you'll live can help you decide how much to put aside for retirement. New tools are available that combine traditional longevity factors with financial and lifestyle information to predict someone's lifespan.

[Ann Tergeson]

How much income you have might be correlated with, you know, how often you can go to the doctor and how educated you are might be correlated with, you know, not only how often you go to the doctor, but if you do, if you follow instructions that are given to you by the doctor.

[J.R. Whalen]

That's Wall Street Journal reporter Anne Tergason. She'll also explain how Data from companies like 23andMe is being used to help determine the likelihood you'll face illness later in life. That's next. Knowing how long we'll live and how many of those years will be healthy would make planning for retirement easy. But those data points are unknown. Retirement savers can turn to online tools and services to help them get lifespan estimates to make financial planning a little easier. And Wall Street Journal reporter Ann Tergeson is here to discuss.

[Interviewer]

So, Ann, traditionally, what sorts of data have financial advisors used to tell clients how much they should put away for retirement?

[Ann Tergeson]

You know, typically what financial advisors will do is it's some variation on this, but they'll look up some kind of life expectancy figure for the person, usually in, you know, some kind of government tables. IRS publishes some tables, Social Security Administration has estimates. So, you know, it's pretty easy to come by. Often, you know, they might use an estimate for a man, you know, just by gender because men, women tend to outlive men of the same age. So they'll do that and then, you know, often they'll add some kind of margin on maybe five years, maybe 10 years for someone who has very long lived relatives just to give some kind of, you know, margin for safety.

[Interviewer]

And that's based on a framework of their biological age, what their actual age in years is.

[Ann Tergeson]

Right? That's your chronological age so it's like looking up, you know, how long do you expect this person to live? And then you can kind of look at how much they spend, and you get an estimate of what they might want to spend in retirement. You multiply the spending by the number of years that you expect them to live.

[Interviewer]

But now there are some new sets of data being added to this formula

[Ann Tergeson]

I was very interested in. The issue is that, like, academic research shows that people can be on very different trajectories depending on various characteristics that they might have. We all think about genetics as playing a big role in how long we're likely to live. You know, if you have family members who've lived into their 80s, 90s, or, you know, maybe even hit 100, you tend to assume that means that you're going to live a long time. But actually, the information. Scientific data shows that genetics typically account for about 20% of longevity. You know, that's not the case for everybody. You can get some kind of inherited disease that might be, like, fatal. But barring something like that, typically genetics aren't really the overriding determinant of how long people live. So academic research shows that things like income, wealth, education play a big. And so you can see in the top 1% of the income distribution, men tend to live 15 years longer on average, than men who are in the bottom 1%. So that's a really significant difference. So, you know, I think a lot of academics and others are waking up to the possibility of providing people with more customized, personalized information about what their potential lifespan will be like.

[Interviewer]

And it could also be adding in just poor choices in terms of what they do during their life.

[Ann Tergeson]

Yeah, lifestyle plays a big role as well.

[Interviewer]

So things like, I suppose smoking would play a significant role.

[Ann Tergeson]

Right. So things like smoking, you know, potentially all the things you would think about, like exercise habits or, you know, do you have a good diet or are you eating, you know, just junk food all the time, so that sort of thing. But, you know, lifestyle is sort of a broad category. So that can also include, you know, how much income you have, because how much income you have might be correlated with how often you can go to the doctor. And how educated you are might be correlated with not only how often you go to the doctor, but if you follow instructions that are given to you by the doctor, and it can cost a lot of money to keep yourself in good shape. So I think that all these things are sort of tied together.

[Interviewer]

And what's interesting is that what comes into this scenario now is a different Age number.

[Ann Tergeson]

Yes. So people can, ultimately, it's very hard for a non scientist like me to sort of assess the value of these tools. But you know, some of them are being put out there by people who are experts on aging who are, you know, academics have very good reputations. So I would tend to have, you know, some faith in them. But yes, the idea here is to give people more individualized ideas of what their potential, their own potential lifespan will be. You know, for a woman, I don't know the exact number, but from birth, you know, maybe life expectancy is, I think in the low 80s somewhere. But you know, that's for the population on average. So, you know, for a person who has very long lived relatives, who's sort of affluent, very well educated, that number could be low by a factor of a decade.

[Interviewer]

And that could then play a role in how you map out planning for retirement.

[Ann Tergeson]

Right? It could. I mean, you know, a lot of financial planning is about planning for these sort of like unlikely events that could have, you know, a big impact on your finances. So for example, maybe it's likely that you'll die in your mid-80s according to some of these tools, but maybe you want to plan to live another 10 years because you want to have some cushion against the unlikely event that you live longer or that your spouse does. So it depends on how people want to. It depends on how tolerant people are for risk and how they want to weigh the odds.

[Interviewer]

And even if somebody is healthy, they could still face significant medical costs along the way.

[Ann Tergeson]

Right. So that's another issue. Sort of measuring health span is another issue by which I mean, so say you come up with some kind of estimate, like in my case, the estimate that I got when I used one of these tools is that I have a 50% chance of living to about age 88 given a bunch of my own individual characteristics.

[Interviewer]

And you have family members who lived very long lives.

[Ann Tergeson]

Yeah, yeah, I do. And so, you know, that 88 actually might be kind of a lowball number depending on the person who provided me with this estimate said if I wanted to go get a genetic test and get tested for this one longevity gene, he might actually assume that I would live longer. But you know, for a lot of people, another key question, it isn't necessarily how long am I going to live, but how many of those years are going to be spent healthy versus unhealthy? Because when you're unhealthy, you can have higher medical costs, but you also can have long term care costs which can be really, really High, depending on how much help you need.

[Interviewer]

What I thought was fascinating is that there's a startup that is using data from 23andMe and you think about 23andMe. It's a fun way to learn about your genetics and your backgr and nationality and such, but it can really play a role in helping someone understand how their current health might translate into how many years they're going to live.

[Ann Tergeson]

Yeah. So the person I spoke to, the company will take your 23andMe results and they'll analyze them for just a handful of genes, one of which is called the FOXO3 gene, which is associated with longevity. Now when I spoke to him, I asked are there other genes that have been identified that are associated with longevity and do you test for them? And the answer was no. This is the only one that they look at at the moment. They also will analyze genes that provide some kind of genes that are associated with Alzheimer's disease. Some of them are protective, some of them put you at higher risk so they can give you that kind of information. But you know, there are some big caveats there. Number one is that overriding statistic that, you know, genes only account for 20% of your longevity. And it's pretty clear that lifestyle factors are more significant even when it to if you carry the gene that predisposes you to a higher risk of getting Alzheimer's, that's not your fate. So that people who have like there have been studies done that I've read that show that people who have healthy lifestyles with that gene have lower incidence of getting the disease than people who have unhealthy lifestyles. So I think that there has to be that big caveat attached to this sort of genetic analysis. It can be helpful to people, but it's certainly not fate.

[Interviewer]

And a 60 year old woman could see all the data and it's determined that she has the life of a 51 year old woman because she's in such good health. But there is no hard and fast formula for this. It seems like there are still a lot of random variables in this.

[Ann Tergeson]

Yeah. And that's exactly what every person I interviewed told me there said that we can't, nobody can definitively tell you. And we all know this, right? We all know that you could that old saying, I could just get hit by a bus at any moment. Right. But that's what is the reality, right? I mean, you know, you know, people who are very healthy who got, you know, diseases like cancer and there's no cause and effect.

[J.R. Whalen]

All right?

[Interviewer]

That's Wall Street Journal reporter Ann Tergeson with us. Ann, thanks for coming on the show.

[Ann Tergeson]

You're welcome.

[Interviewer]

And that's your money briefing.

[J.R. Whalen]

I'm JR Whalen in New York for

[Interviewer]

the Wall Street Journal.

[Small Business Owner 1]

Access to affordable credit helps me pay my employees, but I don't really need it.

[Small Business Owner 2]

Inflation is killing me, but who cares? Big ret retailers are making record profits. That's why we support the Durbin Marshall credit card bill.

[Small Business Owner 1]

See, banks and credit unions help small businesses make payroll. This bill would cut the vital resources

[Small Business Owner 2]

they need while increasing megastore profits. They deserve it, don't they?

[Electronic Payments Coalition Representative]

Tell Congress, stop the Durbin Marshall money grab for corporate megastores paid for by the Electronic Payments Coalition.