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Subject:  Re: Estimating Retirement Incomes, Pt. 1 Date:  9/20/2011  12:24 PM
Author:  culcha Number:  69623 of 88052

My thinking is this. If you begin life as member of a cohort of 100,000 of the same gender, what are the odds that you will live to age 80? 90? 100? Longer? We can know from looking at the table that males have an even odds chance of living to age 79. (For females, the even-odds age is around 84-1/2). Unfortunately, most people confuse “average life expectancy” with their own personal life-expectancy. In other words, generalizations drawn from a broad sample of 100,000 cannot be applied with much assurance to a sample of one. For sure, that is the way to bet. But it’s also a bet you might lose.

Seems to me that all bets about your own personal life expectancy are bets that you might lose. If by your own life expectancy, you mean something like your actual age at death, who could have certain knowledge about this ahead of time?

I also have a problem with determining the life expectancy that you, as say a male of age 80, can reasonably anticipate. It doesn't seem to make sense to use a data set that includes all the males born around the same time as you were; most of them are dead now. And yet you say that that is the way to bet. An 80-year-old man should bet that he's dead! The correct cohort seems to be all (living) 80-year-old males.

Realistically, the guy who retires at 65 will have to know the odds of his continuing to live for 10 years, or 20 years, or 30 years, or whatever. It's that expanse of time that he'll need his retirement money for. And years don't come in a Monte Carlo sort of way: he'll never have to worry about succumbing to SIDS, childhood diseases, or even being drafted into the military -- those years are gone. He just needs info about what happens to guys after 65.

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