[00:00:00] Hi, I'm Ed Slott and I'm Jeff Levine. And we're two guys who just love to talk about retirement and taxes. Look, our mission is simple to educate you, the saver, so that you can make better decisions because better decisions on the whole lead to better outcomes. And here's how we're going to do that. Each week, Jeff and I will debate the pros and the cons of a particular retirement strategy or topic.

With the goal of helping you keep more of your hard earned money. At the end of each debate, there's going to be one clear winner. You. A more informed saver who can hopefully apply the merits of each side of the debate to your own personal situation to decide what's best for you and your family. So here we go.

Welcome to the Great Retirement Debate. Hey Ed, you're a planner, right? Right. You plan for most things? Right? And I'm early on most things. That is true. I've known you for a long time. You not only plan, but you are early, which is interesting given the topic of today's Great Retirement Debate. And have you ever thought about how long you should [00:01:00] plan to live?

Oh boy. Yeah. Well, oh boy is right. But it is an interesting thought. You know, if you're in retirement. One of the biggest challenges is there's an unknown about longevity. Right. And we always say, if you don't plan, you're basically planning to fail. So you have to put a number in there. You've got to figure out.

When you are going to die for planning purposes. So, how long should you plan to live? That's the topic for today's discussion. Well, I used to cover that when I did estate planning for clients. Just to ease things up because they would come in tense with all their papers. I said, well, let's get right to the bottom of this.

Just give me a date of death. You know, because they expect me to ask, Oh, what's your, you know, your family and this and that. So, I start right off. Just give me your day to death and then we can work from there and everything will work out great. It would be, you know, I always say if there was one, I know you're joking, but if I always said if, if, if I could know one thing about a retirement, you know, just give me one thing, remove one [00:02:00] variable or the number one thing I would want to know is that number is that, you know, or that age.

What age will you be when you die? That would dictate so much of the other planning, whether it was the investment management, whether it was the redistributions, whether it was the tax planning. That age, which we don't know for certain, really impacts so much. Right. Right. There's that old saying, I think it's plan for the best of what's or the best. No, no, you should always plan for the worst. That is also for the best. That's the thing. Plan for the worst, hope for the best, but they're reversing this depending the way you look at it. What's the worst that you, you die early and you don't run out of money. That's right.

When it comes to retirement, the best, I mean, that's right. Maybe, right. It depends upon what your point of view is, but that you're right. That is the challenge, right? The, the, the bad part, would be living too long. So, and that's the number one fear in America, living too long and running out of money.

Everybody's afraid of that. Yes. Even people with millions and millions of [00:03:00] dollars. More so those people I've worked with those people and I would see their numbers and their net worth. And they said, well, you know, it's got to last us. Yeah. We're going to live. My father lived to 90 and I could live to a hundred.

And look how many people live past a hundred. Now, a lot of people today, there are a lot of centenarians out there. Um, what. Let me ask you directly, right, because you mentioned at the start that we're in a different point in life. I didn't mention it, but I'll mention it now. Uh, that may have been on an earlier take, but, uh, it's true.

I have a different perspective because I'm older than you and I'm closer to the promised land than you. So you think differently. And I found that true. When I used to do a state planning, I've been doing it for 40 years. I was in my thirties. 30s and my clients were 60, 70 or 80.. Now I'm 70 and most of them are dead, but some of them are still around in their 90s.

So I have a totally different perspective. And just now I'm realizing, Oh, that's what that guy meant when he [00:04:00] was talking, he was worried about this. And here I am in my 30s. Oh, give me the numbers. We'll do all this. And he's on a there and a husband, wife on totally different wavelength. And not only that. They were trying to predict which one of them would go first.

That's right. That's right. Well, again, that dictates a lot of the other planning that would come along. So, so, so let me ask you a question. And the kids were trying to predict when they're getting the money. Yeah, I wonder why. So, we, we obviously, we don't know what the future holds. But, uh, You're in good health.

You are, as you mentioned, you're 70 years old, roughly. So, we've got, you know, hopefully many, many years, many decades still for you to, uh, impart your retirement wisdom on the world. But one day, like all of us, uh, we will all come to our, have you ever thought about, for your planning purposes, when you, like, what that age is, when, when do you plan to die?

Here's what I do personally. I plan every year. I update my plans [00:05:00] every year. I'd say for the last few years I've been doing that. I guess as you get older, because things change, things change with your children and grandchildren and families and assets. So, I update it every year, so it's always current.

That's one of the best things to do is to make sure you are looking at it each and every year. I look at, you know, when people are thinking about how long should I plan to live, like, what date should I put as the end date actually in my plan? Like, literally, how long do you plan to live? You know, I find that a lot of people just end up with a default number, right?

Or they, you go to a financial advisor, the financial advisor puts, 95 in the plan. It says, Oh, we're going to run this to 95. Right. You know, there's a lot more that should go into this discussion for, for a lot of people. Uh, there's lots of different longevity calculators out there that people can use.

It's worth making sure that, um, you know, it's really worth giving this some additional consideration. We look at factors such as how long have your parents lived, what type of health are you in. That's the [00:06:00] number one thing. When I would cover this with clients, they would always say, well, my father, like I said before, my mother, they always go by that, by that number and they say, well, that's probably me, but that didn't work with the baby boomers and their parents because their parents, if you remember, my grandparents, uh, was common, were common to die in the 65.

That's, uh, actually, I don't know if this is folklore or true, but that's where they got the age 65 for social security. I've heard that before. I've heard that before. Right here, right now, actually. That's when I heard it. Well, I don't know if it's true, but originally, I guess I came out under FDR and they said, we'll make it age 65 because by then they'll all be dead and we won't have to pay anybody.

And that was the age they figured most people will die. Well, now we're in a whole different scenario, medical technology, keeping people alive, money has to last longer, especially with medical bills. So you really have to plan for a much longer time horizon. So here's an interesting thought, right? Because when we're looking at [00:07:00] Planning for the length of a lifetime, every dollar or every year that you plan to live effectively is more dollars you have to keep in reserve, right?

Because if you plan to live to a hundred, you've got to make sure that you have money to, to last that long. If you plan to live to 95. That's five years fewer of expenses you need to have. You're able to potentially spend more earlier because you don't have to keep as much in reserve for later. I mean, there's only, you know, 1 can only be spent one place.

The challenge becomes what's the, you know, what is the acceptable percentage, if you will, that you're going to outlive your money? For most people, it's very like most people want to have almost zero chance of outliving their money. Right. People always say, oh, I want to die broke. Nobody wants to die.

Nobody's going down to their last penny. Right. You can imagine someone, as their account is dwindling down the last few years, going, well, I'm just going to keep spending like a robot, [00:08:00] because that's what my plan when I made it 30 years ago said. You know, there are constantly changes. Uh, going on, not just to you, but also even externally, if you think about market factors, you know, someone who retired in, in the early seventies, let's say that was a, a historically bad time to retire.

You had inflation, which was about to tick up very quickly. You had market turmoil. The bond market wasn't very good. I mean, that was a period of time where It was, it was brutal to be a retiree. Just about everything that could go bad as a retiree happened for those who were retiring, let's say, you know, late sixties, early seventies.

Meanwhile, you kind of retire in other periods of time and you have all the, the tailwinds behind you. And it almost doesn't matter what you do. You could spend like a, uh, the proverbial drunken sailor and almost not run out of money because. You have this amazing market tailwind behind you. The, the idea here is simply that you create a retirement plan at let's say 65 and it's going to, [00:09:00] you know, to work until whatever that age is, 90, 95, a hundred or whatever is really.

You know, it's a farce, right? But you also have to plan. You mentioned retire. We're assuming people are retiring. One of the best ways to keep keep making sure you have income for life is to keep working if you can. And a lot of people lately have unretired. Gone back in the workforce and you don't have to make that much.

If you make just enough to, uh, have your basic monthly living expenses, you're going to be okay for a long time as long as you can work. Absolutely. Just that have extra income stream. It takes your, let's say, withdrawal percentage from taking, you know, four or 5 percent of your account down to maybe two or three and can really extend the lifetime of your portfolio, give you extra years of buffer, et cetera.

So, Ed. What would you say if someone listening right now says, well, all right guys, I hear all these things. I understand all these factors. Um, but like, what would you do? Like if it was, if, if, if you were me, me being the, [00:10:00] you know, our, our, our listener, What would, like, what would you tell them if they were sitting across from you and said, Ed, how long should I plan to live?

How would you go about telling them how to arrive at that number? Well, I would go at, like any accountant would, since I am an accountant, income versus expenses. You know, how much you bring in and how much you spend. People always ask that question, how much money do I need for a time? And I always answer with a question, tell me how much you spend.

It's always going to be a function of how much you spend. And for how many years would you anticipate they would need those expenses? Well, uh, for a long time, I would say you have to plan in today's, other than certain health things that you may know about already, probably into your 90s. I think it's fair, I mean, I, I go back to, you know, what is the likelihood that you will outlive those dollars?

You know, what, what is the likelihood that at some point you will have, you know, zero dollars left, which we know people won't actually get to because they'll naturally adjust as their account is going to go up. It's just a human thing, right? Yeah. You're never going [00:11:00] to go there. But some people have no choice.

Again, it comes back. If your income can exceed or even equal your outlays, your expenses, you'll be, you'll be good forever. Yeah, I think there are a couple of different ways of going about this, right? One is just the very technical way of like, do I want to, you know, you can blanket say like, I'm just going to go to 95 or I'm going to go to 100, but there are, there are so many factors to consider here.

For instance, you know, even where you live is a factor, right? If you live close to, uh, you know, uh, an area where there's good health care providers, you're more likely to go, right? If you, if it's a five minute drive to a doctor. Wait a minute, you're more likely to go? Not, to go to the, to go to the, to the health care provider, not go.

Are they, are they bad, health care providers? We're not, this is not, no, not planning to die. This is when should you plan to die, not should you plan, you know, alright. So, with the, with, with the idea behind that being like, You're going to drive five minutes to go see a doctor. If it's an hour to the closest doctor, you're probably going to be a lot more, [00:12:00] uh, more discerning if you will, when you go visit and that can lead to things.

There are, uh, you know, it's, it's perhaps sad to say, but there are a lot of socioeconomic factors in here, uh, where those with higher income and higher net worth still, even in retirement where most people are covered by Medicare. Those with higher income, higher net worth still oftentimes have either access to better health care providers, they're willing to pay out of pocket for certain things, they may have better supplemental policies where they don't worry about going to the doctor more often, or if they've got copay, they just don't worry about it as much.

So once again, even, even in retirement where it's at least a little bit more of an even playing field because most people are covered by Medicare, if not a, um, uh, Medicare Advantage plan or similar type of policy. Even there, you can look at differences in income, uh, and and see, you know, differences in life expectancy.

I mean, even just down to the quality of food you can afford to buy right for your family. Having a different income can matter. So there are all these factors that [00:13:00] come in. There's lots of, um, lots of tests out there. One of the ones that I love Ed and Um, no affiliation. So just so everybody's clear, you know, I don't get any ad revenue if, uh, you know, but there's a livingto100.com has a longevity calculator out there. It's a little bit more robust than some of the other ones. I personally, I like it again. No affiliation. I'm not, you know, no one's sending me a case of brandy or anything like that for talking about them. But if our listeners are wondering, like, well, What about my parents?

And what about these factors? That's a really good tool to help use to give you an estimate of a realistic life expectancy. The other thing I really want to point out here, and before we, uh, you know, I think I, I don't know if it was that one. I did one of those years ago, and is that the one where they ask you all the questions?

Do you smoke? Do you do this? Yeah, I think I got, you know, I didn't do any of those things. They're not too exciting, I guess. So how come it said 54? Yeah, right. So it put, put it, I forget the age, but it was in the nineties cause you know, you didn't do any of those things, but I [00:14:00] think there's two other factors.

One I mentioned, when do you retire? Because if you keep having income come in, obviously that's the biggest help, but we didn't talk about taxes. If you do better tax planning, for example, you have more money saying Roth IRAs. If you can reduce taxes, that's an expense. Anytime you reduce expenses, you're going to have more money.

So if you had, in your earlier years, say in your 60s or 70s, whatever, you, uh, had piled more money into tax free vehicles like Roth IRAs, and yet you could, uh, you could reduce quite a bit of taxes for the rest of your life. Agreed. Agreed. You know, what, one other thought to, uh, that I have here before we wrap up, uh, today's discussion.

When people think about what is my life expectancy, I think the single biggest mistake I see people making is they're looking at, let's say a life expectancy table, right? And they go and they say, Oh, I was born in like [00:15:00] 1955. And this is how long, you know, the average person born in 1955 lives. Well, first off that in and of itself is a bad way to go because some people born in 1955.

died in 1956, sadly, and some people died in 1957. So the worst thing you could do is look and say, how long someone born nine, what's the average age born of, you know, that someone will live if they're born in 1955, because it doesn't matter if you're this year's old now, right? Let's say you're 70 years old.

You don't care about anybody who died from 1 to 69 for your longevity, you only care about how long will someone who's 70 years old today likely live. And that's how the IRS life expectancy tables work for taking money out of an IRA. The older you, you are, What? The longer your life expectancy. That's right.

The longer you've lived, the longer you're likely to live. Yep. Right. Now, that's why if you look, you say someone, Oh, if you're, you know, 70 years old, you might have a, a 15 year life expectancy, but when you're 85, it's not zero. [00:16:00] Right. Cause you're still alive. You made it to 85. Now your life expectancy is 90, 91, 92, depending upon who you are.

I don't know if this is optimistic way or scary way to end this, but the life expectancy tables for IRS go to 120 now. Right. That is scary. Yes. I'll take that. All right. I got one more tidbit for you, Ed, before we wrap up. I know I keep saying that, but this one's a good one, too. You know how men and women have different life expectancies, right?

Right. That difference in life expectancy, one thing a lot of retirees don't realize, that difference in life expectancy narrows over time. So when people are born today, there's like a four or five year difference in life expectancy, but by the time a couple reaches retirement, let's say they're both 65, That difference in life expectancy is only about two years or so, right?

It shortens. The longer a couple lives, the more likely they are to have a death that is closer to one another. So it's just a little bit of an interesting tidbit because even when I meet with retired couples, you know, retired [00:17:00] couples, oftentimes, If it's a husband and wife, the husband says, you know, well, I'm probably going to die, you know, five years younger than my wife.

And that may be true in that particular case, but actuarially speaking, it's no longer that five year age gap or so. It actually narrows over time. I guess Men make more silly choices when they're young. I think that's what I take away from that. I don't know. I saw a Times, uh, article years ago. I used it in one of my shows where they said the average span the wife, uh, outlives the husband by 14 years.

So, uh, that was about five, six years ago I saw that. Fourteen years? Fourteen years, yeah. I'm going to have to look up that Times article. All right. Which brings me to today's point, which is we're out of times. Okay. All right. You like that one? Yeah, yeah, yeah. There we go. All right. Well, it's been fun. Ed, great discussion as always.

Lots for people to think about. Putting a retirement date into play is hard enough, but figuring out when that ultimate date of [00:18:00] death is, is a challenging thing. No one likes to think about their demise. But, ultimately, making sure that we have a realistic date inside someone's plan can be a, uh, a really important part to making sure they don't outlive their money.

Yep, yep. Alright, we'll see you next time on The Great Retirement Debate. Jeffrey Levine is Chief Planning Officer for Buckingham Wealth Partners. This podcast is for informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information mentioned may be based on third party information which may become outdated or otherwise superseded without notice.

Third party information is deemed to be reliable, but it's accuracy and completeness cannot be guaranteed. The topic discussed in corresponding arguments are those of the speakers and may not accurately reflect those of Buckingham wealth partners.