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Before you believe everything you read online, it pays to understand the agenda lurking behind those longevity calculators that are designed to estimate your lifespan – as well as the differences in data quality that may generate unreliable results.
What is a longevity calculator?
Ever wonder how much superannuation you'll need to live comfortably? Or if you need to boost your wealth through investing?
If the answer is ‘yes’, then you might have stumbled across a longevity calculator.
Put simply, a longevity calculator (also known as a life expectancy calculator, or the decidedly less cheery ‘death’ calculator) is an online tool designed to help you estimate how long you’re expected to live – and how much money you need to fund your retirement life.
Depending on the calculator (and the agenda of the business that created it), it factors in a variety of personal details, such as age, gender and lifestyle habits, and measures your answers against statistical data to estimate your lifespan.
Why does estimating how long you may live matter?
Thinking about when you might die is not a fun way to spend your time. But neither is worrying about whether you have enough money to last a lifetime.
This is why longevity calculators exist. There are two main potential usages (and be warned, the rest of this article does make you think about your own mortality).
Knowing that there is enough money in the bank to last a lifetime – and perhaps beyond, if leaving a legacy for future generations is important to you – offers peace of mind.
By measuring your potential longevity, you can make more informed decisions about longevity risk (the risk that you might outlive your savings).
How accurate are longevity calculators?
Depending on the research material used to inform each longevity calculator, they can be a mixed bag.
Put the same answers into two different life expectancy calculators and it’s possible that one will tell you to plan ahead to survive until the age of 90, while the other one might predict you need to have that list of favourite funeral songs sorted out before you hit 83.5 years.
To help you have a clearer understanding of the accuracy of life expectancy calculations, consider some key factors that can affect longevity calculator outcomes.
Single or partnered?
Most calculators that promote delivering life expectancy outcomes show that people with a partner enjoy a longer lifespan than single people. Obviously, while people who are unhappily lonely may have wellbeing-related issues that may contribute to negative health outcomes, it is not true of others who are single and loving it.
Kids or no kids?
Although many parents may relate to the feeling that life with kids causes premature ageing, many life expectancy calculators predict parents can expect to live a bit longer than those without children. And although some scientific studies support that idea, there are others that claim the opposite.
What mortality table is used?
Different software developers draw information from different sources. Some statistical data comes from reputable research institutions. Other data might originate from a small client survey done by the insurance sector, driven by a goal to sell more life insurance.
What contributing factors are measured?
Any quality life expectancy calculator should ask current age, or date of birth, for starters. Gender at birth also plays a significant part. So does an honest history of smoking status.
Depending on the longevity calculator, other questions around health and family history, ethnic background and lifestyle (drinking, diet and exercise) habits may also be asked.
But just because there are more detailed questions to answer, it does not automatically mean that the results will be more accurate. In fact, due to the lack of official statistics around the impact that specific combinations of lifestyle factors have on lifespan, life expectancy calculators that ask more questions might even generate less relevant results.
When it comes to budgeting for life expectancy – prepare for uncertainty
Having a positive relationship with a trusted GP and monitoring your health is the best predictor of longevity there is, although nothing is ever guaranteed.
You could live to 95 or pass away at 55. So maybe consider embracing what some financial planners call “planning for uncertainty”. Assume you’ll live to 95, budget with that in mind, and, if you do pass away sooner, you’ll do so leaving your loved ones supported by a strong financial safety net.
The bottom line:
By identifying your personal retirement ‘sweet spot’, you can enjoy the peace of mind that comes from knowing that whatever you withdraw from your super and savings is at a rate that matches the cover you need to last – for life.
If you do choose to use a longevity calculator to work out the basics of your retirement planning sums, do your research to understand the quality of data that drives the calculator’s results, as well as the marketing motivation of the business promoting it.
Dig deeper: Five facts everyone needs to know about life expectancy
Financial disclaimer
The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.
