Actuarial Life Tables – Does It Matter?

ThreeLegStool

Three Leg Stool:
Social Security, Savings, & Pension

I was reading the SSA Actuarial Life Table  and was wondering if this information was even useful. According to the table I was to live to 78.5 years and my wife was to last to 82 years. She is younger so she has the double jump on me.

There are many sides to this information to think about. The first is the information correct? The data here is compiled from all the people in the country. There are so many variables which can change the results. Family history, marital status, lifestyle all are factors which can change the outcome. Also there is the factor of the random act that ends your life before the age factor takes effect. (Example: getting hit by a truck walking across the street.)


The tables themselves are the guide the government (SSA, IRS, etc) uses for retirement fund distribution rules.  What use are the tables to the individual? If I plan my retirement funds only until the 78.5 years what happens if I live longer? I’m out of funds. If I live shorter, I wasted my money saving it instead of using it. This seems to be the problem a lot of people have when they plan for retirement.

My goal is to live to 120 years old.  What if I plan for this?  The changes of what I’d have to do would be big.  The longer you live the more likely you are to need extended medical care. So the more money you would need. I had a colleague who I worked with previously tell me you need more money then you were making when you were working in retirement. He was retired so I would guess he knows what retirement is like. How is this possible? I think this goes back to investing what you have so your investment returns exceed your expenses. This is the main concept I got out of the Rich Dad Poor Dad by Robert Kiyosaki. The building of passive income is essential for retirement. Even when the Social Security Tax was added the idea was Social Security benefits were to be only one leg of a three legged stool; one of which is a company pension. The company pension is passive income. The other leg was savings.  Now there are very few pensions other then a government job and a few large companies.

After think about the actuary life tables it isn’t very useful information to me because:

  • You don’t know how long you will live
  • You don’t know how your health will be
  • You don’t know the exact lifestyle you want to have at retirement
  • You don’t know what the tax rate will be in the future

The only useful information It has is when the government lets you have your money without being penalized; which of course is subject to change.

Actuarial Life Tables can be a tool to help evaluate your life. This document states your time is limited no matter where you are on the table. When working you trade labor as well as time for money.  When you buy investments you trade money for time and labor. What are your thoughts? Leave a comment.

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