Posted Saturday, Nov. 29, 2008, at 8:02 AM
You think the economy is bad? I have worse news: We're living longer.
Well, that's not exactly news. Steady increases in life expectancy have been a regular topic here at Human Nature. Now they're relevant for an awkward reason: The longer you live, the longer you have to stretch out your retirement savings. And right about now, your savings probably aren't looking like they're up to the job.
As the latest Reuters report notes, over the last four decades, U.S. life expectancy has climbed from 70.8 to 77.8 years. By 2015, it's on track to hit 79.2 years. Meanwhile, unlike other industrialized democracies, the United States has replaced pensions with 401(k) plans. So your retirement-income pie can suddenly shrink—as, for example, it's doing right now—and, at the same time, the longevity you've gained from all this lovely industrialization requires you to carve that pie into more and more annual pieces.
Financial planners have even coined a term for this paradox: longevity risk . The Reuters story features an 84-year-old retired nurse who now worries "about outliving her savings." A financial advice executive tells the wire service, "Probably half our clients are retired and yes, we have a lot of very worried, concerned clients. Their leading concerns are, No. 1, that they're going to run out of money."
So, the good news, in a way, has become bad news. And that's not the worst of it. The worst of it is that a lot of these old people who now expect to outlive their savings might decide to kill themselves before they run out of money. I wonder what the financial planners will call that.
(P.S. If you're on the main HN blog page and are looking for a link to add your own comment, just click the headline of the relevant item, and you'll get a page that has a "discuss" link.)