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Subject:  Estimating Retirement Incomes, Pt. 1 Date:  9/19/2011  12:13 AM
Author:  charliebonds Number:  69618 of 80908

This will be a multi-threaded project, rather than a multi-posted thread, because estimating retirement incomes depends on making decisions about several factors, each of which requires its own treatment. But let’s begin at the beginning, which is Estimating how long you will live?

There seem to be five ways of making that estimate: genetic testing (aka, the work being done with telomeres); asking someone like your personal physician and trusting them; consulting a life-expectancy table; filling out a detailed “life-style and family history” quiz and then using their guestimate; and, lastly, doing it “by guess-and-by-golly”. Don’t laugh. The last method isn’t as silly as it sounds. Several studies (which you can track down) have shown that those who estimate a long life for themselves tend to live as much seven years longer than a pessimistic control group (who thought they would live shorter lives). So attitude matters hugely.

The second method isn’t as silly as it sounds, either, because we humans tend not to be able to be very objective about our own numbers. If you trust your personal physician, then ask her or him to make a guess for you at your next annual physical. If nothing else, if she or he is able to be honest and candid with you, you’ll receive an opinion based on seeing a lot of patients with your comparable age and state of health. The third method, filling out a detail life-style and family history questionnaire, has its merits, too, because its guesstimates are typically based on broad data samples, and because the questions tend to focus on the things that have been proven to matter to longevity (not smoking, proper diet and exercise, regular medical checkups, a family history of longevity, etc.) The problem with filling out such questionnaires is that they are so easy to game, and it is so tempting to fudge one’s answer by the little bit here, and the little bit there, that makes the suggested result worthless. As for genetic testing, the method is still in its infancy and fairly expensive. So, in this post, I’m going to dig into a method that is cheap and easy, because what matters in making your estimate of how long you will live isn’t getting the answer right, but in being aware of the consequences of getting it wrong. In other words, as they say, “you don’t want to run out of money before you run out of life”.

The easiest to use life-expectancy table I’m aware of is the one found at the Social Security website. What I like about the table is that the webpage can be scraped, dumped into a spreadsheet like Excel, and then reformatted as a betting table, a portion of whic