Money Obedience

When you use a retirement planning calculator you need to think about how many years you plan to spend in retirement. This thought makes me chuckle. How are we supposed to know how many years we’ll live after we actually stop working?

Think about all the uncertainties surrounding our retirement planning in the first place. How much can we save each month? What if unforeseen expenses hit us? How do we invest our savings? How will our savings grow? What do we do if we face a decline in our investments as most of us have recently? – The answers to these questions depend on so many different things some of which we can control, but some of which we cannot control.

And now we even have to think about how many years we plan to spend in retirement? Now, the answer to this question largely depends on our life expectancy. If we retire too soon and live too long, we may run out of money. If we retire late and die shortly after retirement, we kind of got cheated out of our golden years. Obviously the safest thing is to retire later because you don’t want to run out of money at 88 if you are blessed with a long life after age 65 (when most people think of retiring). If that happens to you, just think how hard it could be to get a new income source at that age. What should be done then?

Well, I don’t really have an exact answer. As is the case in most things “finance” there are many different ways to handle risk and uncertainty. So, I will tell you what I did. I used a few of the life expectancy calculators listed on the page “Life Expectancy”. Funny enough they all came within a couple of years of each other – and can you believe that they all tell me that I will hit 90?

Just to be on the safe side, I added a few more years when I plugged my life expectancy into the retirement planning calculator. (I took an average of all the ages given to me by the life expectancy calculators I used, and then I added 7 years.) I have two reasons why I want to add a few years “just in case”. First, as I said above I don’t really want to run out of money when I will be too old to find work. Second, my yearly health check-up revealed yet again another good surprise. My pulse, my blood pressure, and my cholesterol are even lower now than they have been in the past several years. (Did you know that an annual health check-up itself increases your life expectancy?) I would imagine that my body may hold out even longer than what the life expectancy calculators suggest.

Be aware that there are, of course, no guarantees. Life expectancy calculators only work with averages – they don’t tailor to individuals. But we are all individuals and none of us is really the “average.” Only as a group can we make up an average. Life expectancy calculators can only be used as a very rough guidance about how any given individual might live. Even though I do not treat the result as hard facts, I still enjoyed filling out the questionnaire on these life expectancy calculators – especially since they gave me such a good forecast!