I am 11 years retired, now. So, I was able to watch all of this silliness, from afar and up close (being slapped silly by bankers who tell me that they do not want, nor do they need, deposits - say what?). Too, my whole life has been analytically oriented, albeit in an unorthodox manner (which is more boon than bane). Too, I know economics and that whole little bit of gaming, more than I like to admit. As, I am more interested in issues related to a sustainable economy than the mess (ca'pital'sino) that we currently have.
How to do the cleanup? Well, it is complicated. Okay? For those who might want to pay attention, though, there are some things that ought to be considered and understood.
And, as for going to an financial adviser, even if the such a person thinks that they are doing their fiduciary duty (what does this mean?), one might be better off thinking for oneself. But, where does one go for information that is not so embedded in the capitalistic chimera as to stink?
And, such information ought to address all ages. For now, let's talk about the later years, say like the boomers are facing now.
When I retired 11 years ago, the first thing I did was to look at morbidity and mortality (see below). One motivation was that there had already been deaths in the family. Too, I was on a plane and found a report (MMWR) left by some earlier passenger that I took to be a reminder.
After looking at M&M, I went into a deep dive on finances and then intelligence. After that, there were many more topics covered. This post and the next are looking a the first two.
If we are to talk beans, time has to be considered. When we are young, our life has a long horizon, very long for some people. Also, the earlier years are usually spent working. At some point, the later years, and how they will be funded, come up. For the younger set, the earlier that you think of this, the better, as when one does get to a certain age, there is a quicker pace of departures from a cohort.
|CDC of HSS|
The table shows expectancy for white males in the U.S. in 10-year increments. The last year added, 2003, is on the bottom. Notice the comparison with earlier years, especially those awhile ago. Life expectancy has been increasing. In fact, many of a cohort will live long past the average which is shown here (next graphic).
As an aside, the financial adviser is mentioned above. Many times those types were more into picking pockets than not, unfortunately. It seems that the whole financial industry is a big game, many times. We have gone into that and will again.
This graph shows a typical cohort's timeline in the sense of how many more years they can expect to be alive. Cohort? Think generation, but it is really those who were born the same year. Notice, the bottom axis is "Age." Why does it start at 20? Well, before that all of these lines were too close together to see any one. On the left, the value is the chance of living a certain number of years.
2004 data, U.S.
But, 25 years has a value of 80%. That is, 20% of those who are 55 years old can expect to be dead by 80. You see, that is higher than the average life expectancy. Also, the green line is still at 40% for a 5 year look-ahead at 90 years of age. What does that mean. At 90, the red and yellow lines are gone. At that point, one has a slight chance of living 15 years and a little more for 10 years.
IRS gives only a couple of years even when one is over 100.
The numbers come from tracking done every year. We know the size and characteristics of a cohort due to records. When people die, we know their cohort. After a number of years, we would know the cohort's remaining size.
This type of thing is part of an on-going statistical effort that relates to planning and management by the U.S. government. Below, we get into M&M, a little. As, one responsibility of the CDC is epidemiology, especially for those things that contribute to bad health and early death.
|2004 data, U.K.|
This chart is from U.K. data and relates two things. On the left, there is a scale of those who are still alive. As you would expect, this curve (pink) goes down. The other curve (blue) rises and does so fairly rapidly.
The range of Age here is from 60 to 85, so we are talking the early part of the boomers. As we mentioned (above), for the youngsters, these lines would be mostly straight. It is in the later times that the choices related to this come more to fore. And, that is the theme of these posts.
|Morbidity and mortality report|
Given that a good percentage of a cohort can go way beyond the average life expectancy, the issue of outliving one's assets is not to be taken lightly when planning.
And, planning is a continuous activity. Two main factors would be income and expenses. Next time (Boomer lessons), let's look at a good way to handle this. That is, plan in 5-year increments (updated yearly) with a daily focus for accounting.
Remarks: Modified: 04/13/2016
04/13/2016 -- We also covered beans in the oops sense.