Class Assignment and Discussion: The Living Too Long Problem – Longevity Insurance

Teaching Tip: has a great video titled “Living to 100? That will be $3.5 million.”  (Note, the video appears part way down the page, just click on it and it will show up.)

“Live long and prosper” – it’s the Vulcan greeting, often spoken by Mr. Spock on the original Star Trek television series back in the 1960s, and in reruns ever since.  It’s a wonderful greeting, but for many of us, it’s a tough thing to do.  You’d never think that dying early has an upside, but when it comes to retirement planning, living long and prospering are not that easy to do.

Recently, in the article “Living to 100? That Will Be $3.5M” Smart Money magazine took a look at the challenges of living to be 100, something that many of us are going to do, whether we like it (or are financially ready for it) or not.  According to the Bureau of Statistics, the average American will spend about $3.5 million if they live to 100.  About $1.5 million of that will be spent by the time you turn 50, and another $1.4 million will be spent by age 81.  Then to get to 100 you’ll need another $630,000.  Sound like a lot?  Well, it is, and not everyone is going to be able to live as they would like to in retirement.  The key, of course, is planning ahead of time.  Principles 1 and 2 are good companions in this case “The Best Protection is Knowledge” and “Nothing Happens Without a Plan”.

Making all this even more of a challenge is the fact that by the time you will be tapping into Social Security, it may not be as generous for you as it is for seniors today, and the likelihood that you have a pension from your employer is also on the way out.  In Chapter 16 of Personal Finance Turning Money Into Wealth there is a very revealing – and perhaps somewhat scary – figure depicting the importance of starting to save for retirement as soon as possible.  When you see that delaying just one year can cost you almost $235,000 really makes you sit up and take notice.  Perhaps that Vulcan greeting should be tweeked a little to read “Start saving now to live long and prosper”.

Discussion Questions:

  1. What do you think the chance is that you will live to 100?  Now read the article “Live to 100?” from the Guardian and check out the “Probability that You’ll Live to 100” – this is data for England, but it’s essentially the same here.  Are you surprised?  How does that impact your savings plans for retirement?  Be prepared to discuss this in class.
  2. Chapter 1 of Personal Finance,Turning Money Into Wealth talks about the challenges women face in retirement, and why personal savings and Social Security retirement benefits are more important for women than thay are for men.  Why is this?  While women face serious challenges in retirement, why is it important for men to understand the challenges women face?  Be prepared to discuss this in class.
  3. Ask a relative or friend who appears to be enjoying retirement about his or her retirement planning. Consider both financial and personal implications.
  4. Talk with someone who is currently retired about his or her sources of retirement income.  Be prepared to share what you find with your class.
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