Is Your Life Expectancy Lower than Your Parents?

Life expectancies have dropped over the last three years in the United States, unlike between 1980 and 2014 when most of the United States experienced a boost in life expectancy.  Today despite “medical advances” (and too often because of those advances) life expectancies are on the decline.

Statistically, death due to medical intervention, according to John Hopkins, is now the third leading cause of death in America.  And when you factor in the 130 people who die daily from an opioid overdose and realize that 50% or more of those are directly traceable to an initial opioid prescription drug, then the death rate due to medical intervention is much higher than the John Hopkins study suggests.

Today many Americans are not living as long as those who live in Croatia, Mexico, Nicaragua or even Bangladesh.  And certain places in America have a much lower life expectancy, age 66 through 69, which is much lower than the national average of 78.6.

So, what about your life expectancy?  It depends on several factors which all seem to pertain to your wealth. Factors such as diet, education, physical activity, suicide, and drug usage are amongst the top reasons people die prematurely in this country.  Wealth, of course, is a relative, rather than a quantitative, value and can vary tremendously, depending on the demographic in which you live.  A $500,000 home in Connecticut or California is not the same $500,000 home that you would find in North Dakota or Mississippi. But regardless of your demographics, keeping more of your earned income or of the gains you have made in passive or portfolio income, is critical to your wealth and health, because those who are less wealthy don’t live as long as those who do, according to recent longevity studies carried out by Prudential Retirement. And that means educating yourself and becoming a better money manager can increase your quality of life and possibly even the length of your life as well.

One area of education that is smoothed over, or ignored, by many financial advisors, planners and individuals is your risk tolerance. You may believe, as many advisors will tell you, that your tolerance for risk if high when you are young because you have time on your side to make it all back again if you suffer a loss.  Or you may be led to believe that you have a high risk-tolerance simply because you enjoy taking the risk.  This kind of reasoning is like base jumping where “60% of participants suffer fatality”.[i]  One base jumper sums up the attitude of those who seek this kind of risk.

“I like being afraid, I like the fear, I enjoy it. In BASE jumping, every small thing dictates life or death. It makes me feel vibrant. Extreme sports athletes have the ability to sustain, cope with and enjoy the amount of stress other people would define as bad experiences.”

Until they die, of course.

The same can be said of those who get a thrill in taking on extreme financial risk(s).  The ride is exhilarating, while it lasts.  Then the bottom falls out and people start committing suicide, turn to drugs and alcohol or become severely depressed.  Much like Mr. Toad, of The Wind in the Willows, when he had his motor car confiscated from him, they can no longer function productively in society and must depend on others to supply their basic needs.

And so, evaluating risk tolerance should focus more on protecting your gains instead of building huge account balances.  Nobel economists Robert Merton and Myron Scholes, have warned about the risk associated with attempting to build huge account balances in 401ks, IRAs and other retirement vehicles.

• “The inherent risk in such planning is that it takes the “exactly wrong approach…emphasizing account balances and investment returns, thereby encouraging savers to amass the largest portfolio as possible, which pushes them to take too much risk. That’s la-la land.” 

Focusing on what your income needs to be in the future when you can no longer work and produce like you do today is the safe and secure way to create a sustainable future.  And because that is not the focus of most financial planners, advisors or individuals the seeds for the coming pension crisis have already been sewn. And it is but a matter of time before they crash along with all those who have assumed the risk associated with them.

The use of Universal Life insurance is another way that investors and financial advisors and planners are willing to increase risk in hopes of accumulating larger balances.  And yet the companies that sell these Universal Life products willingly and repeatedly state that the reason they offer these products is that they reduce the risk of the life insurance company by putting that risk back onto the backs of the owners of these policies.  Here is a disclaimer found in a recent Indexed Universal Life Contract that came across our desk.

• All values are subject to change by the insurer. The rates for the Percent of Premium Expense Charge, Monthly Cost of Insurance, Monthly Expense Charge, Monthly Policy Fee, Monthly Percent of Accumulated Value Charge and Rider Charge, will be determined by the Company and may change from time to time based on expectations of future anticipated experience.
• Future anticipated experience can include, but is not limited to, investment earnings, mortality, persistency, taxes and expenses which may affect these assumptions.
• Actual results may be more or less favorable.

Why should you assume such risk when many insurance companies are happy to assume that risk for you when you purchase Participating Whole Life Insurance?  Is it that you enjoy the thrill of defying the laws of nature, much like the base jumper cited above?  Hopefully not.  Hopefully, it is because someone has told you that the risk tolerance in those products is manageable for you because an action based on a false premise can be corrected to change the outcome.

But for those who don’t like assuming risks that others are willing to take for them, we are here to help you keep more of what you make so that you can have the funds you will need to live more comfortably when you can’t be as productive as you are today.  That’s our guarantee!  No risk involved because we don’t want your life expectancy to drop below your parents’ life expectancy.  And we want your quality of life to be even better because that is a huge thrill for everybody.

[i] https://www.telegraph.co.uk/men/active/11612292/BASE-jumping-the-life-or-death-appeal-of-the-worlds-most-dangerous-sport.html