Forget the 401k: Life Expectancy Falls

Ready the Grim Reaper. The SOA has some depressing news.

Ready the Grim Reaper. The SOA has some depressing news.

Pack it in, people. That’s a wrap. It turns out we aren’t living as long as once thought, and therefore we won’t need to save as much.

Okay, a bit hyperbolic in tone, but the Society of Actuaries (SOA) does find life expectancy has shortened.

In a thoroughly confusing and completely unreadable report for the average lay person, SOA now says life expectancy for a 65-year-old male declined to 85.8 years when compared to 86.2 years in last year’s report. Life expectancy for a 65-year-old female is now 87.8 years when compared to 88.2 years during the same time frame.

“The updated improvement scale indicates a slight decline in life expectancy as a result of the slower average rate of mortality improvement,” SOA says in a way only actuaries would.

“Longevity for younger Americans was also affected: A 25-year-old woman last year had a 50/50 chance of reaching age 90,” Bloomberg (thankfully) observes when commenting on the study. “This year, she is projected to fall about six months short. (The average 25-year-old man is expected to live to 86 years and 11 months, down from 87 years and 8 months in last year’s estimates.) Baby boomers, Generation X, and yes, millennials, are all doing worse.”

Citing a study from Princeton University issued in December, the news service notes that over the past several years, the health of Americans has deteriorated—particularly that of middle-aged non-Hispanic whites. Among the culprits, it says “are drug overdoses, suicide, alcohol poisoning, and liver disease.”

The SOA updates the report (or mortality scale) so it can be used by pension plans to assist in making forward mortality assumptions in the valuation of pension payment obligations. Based on the SOA’s preliminary estimates, the 2016 report may reduce a pension plan’s current liabilities by 1.5 percent to 2 percent, depending on the individual characteristics of the plan.

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