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Financial Life Notes #8

From Martin Wealth Management, LLC
For Your Financial Independence and Peace of Mind

31 October 2007

Live Long and Prosper

William D. Starnes, CFP®

Hockessin, DE

Death comes to each of us in our own due time. No one can avoid it. To generate sensible financial planning recommendations, mortality must be considered. In fact, I quickly think of life expectancy when I hear questions such as:

Should I take the lump sum or the pension income option from my employer?
What survivor option should I elect with my pension?
How much can we spend in retirement?
When should I begin taking Social Security?

How Life Expectancies Will Change

Life spans are increasing annually by about one percent. Developments in medical science lead to longer and healthier lives. But how long is long?

Futurist Peter Schwartz, in his book Inevitable Surprises, says that life expectancy changes due to medical advances will begin having a significant impact beginning in 2007. He says, "It is certainly plausible that a significant number of human beings might live to age 150 by the year 2125. More likely, we will find ourselves able (with some medical interventions) to live to 120, and our children to live to 150. Even if none of this comes to pass, however, it is inevitable that a significant number of people in industrialized countries will live to 100. A society in which millions of people routinely live past 100 or 110 would be significantly different from any society that human beings have ever previously known."

How a Longer Life Expectancy Will Affect You

How will a longer than anticipated life expectancy affect you? Consider the following:

Will you want to "fully retire" at 55, 60, 65, or 70? In the 1970s when the average life expectancy was 70, it made sense to retire fully to enjoy a few well-earned years of rest and relaxation. But what if you can expect to live vigorously until age 100 or beyond? Retirement will no longer be about just rest and relaxation but will be filled with education, adventure, alternative employment, and activity.
Can your pension stay funded if recipients live longer than expected?
How will longevity affect the already faltering Social Security and Medicare systems?
Will you have to keep working past “retirement” to supplement your savings?
Will annuitizing all of your assets (with a very secure insurance company) end up being the best investment of your life?

Estimating Your Own Life Expectancy

What is your life expectancy? No survey, actuarial table, questionnaire, or even your family history can predict your lifespan. "The genes you inherit determine about 20 percent of your life span; your lifestyle choices decide the rest," says Dr. Walter M. Bortz, past president of the American Geriatrics Society.

One rule of thumb (if you are male) is to take your father’s age at death and the age of your father’s father at death (if they died of natural causes), average the results, and add 10 years. If you are female, use your mother and your mother’s mother.

There are also some "fun" online life expectancy surveys on the internet. I recently visited the following page on the MSN web site (http://moneycentral.msn.com/investor/calcs/n_expect/main.asp/) which suggests that I will live to 84.

Ask yourself (after reflecting on your survey results, own lifestyle, and family history), “What is the longest I could see myself living?” Then you will likely have a reasonably conservative estimate of your own life expectancy. You and your advisor can then plan for your prosperous longevity.

I hope you enjoy this issue and find some of these tools useful. If you have any questions or comments, please send me an email at steve.martin@mwm3.com.
Steve

Does your group need a speaker?

If your group needs a speaker, please contact Steve at Steve.martin@mwm3.com. Topics include – “Your Money and Your Life”, “Passing on Your Values”, “The Five Fundamentals of a Successful Financial Life”, “Raising Money-Wise Kids”, and “Grand-parenting for Money-Wise Grandchildren”.

I hope you enjoy this issue and find some of these tools useful. If you have any questions or comments, please send me an email at steve.martin@mwm3.com.

Available on the MWM Website

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Martin Wealth Management, LLC, is a Fee-Only Financial Planning firm located in Fort Collins, Colorado, and is a Registered Investment Advisor with the State of Colorado.

Martin Wealth Management was founded on the belief that people should use their money to create a fulfilling life – rather than using their life just to create money. Financial Life Planning from Martin Wealth Management begins with this assumption and focuses on your values and dreams. We utilize concepts and processes developed by George Kinder – known as the “Father of Financial Life Planning.”

Please call for a free initial consultation or to arrange for a speaking engagement for your organization.
Steve Martin – MBA, Fee Only Advisor, DFA Funds Approved Advisor, Member of the Alliance of Cambridge Advisor and the FPA