executive summary
The unpredictability of lifespan is a major challenge in retirement planning and provides an impetus for insurance products that guarantee lifetime income. It is known that lifespan differences vary across demographic and socioeconomic groups, but the pattern of this variation over time has not been studied.
This article explores trends in lifespan differences across groups, conditional on different starting ages, and over time, and quantifies the size of the differences in dollar terms using the wealth equivalent method of equitable immediate annuities. Specifically, the analysis considers the following populations, all segregated by sex: the entire U.S. population, low/high educated whites and blacks, and annuitants. Life tables were estimated where necessary to supplement existing published life tables to determine differences in life expectancy and age at death for each population. The tables are used to calculate these indicators conditional on survival to ages 50, 62, 67, and 70, all ages selected to represent critical ages for retirement planning and policy.
Analysis found:
- Population-level lifespan differences have generally remained stable since the 1970s.
- Blacks and those with less education tend to face larger lifespan differences across all years than whites and those with higher education.
- Lifespan differences increased among all racial education groups studied, except for black men with low educational attainment.
- Compared with the general population at age 50, annuitants generally face smaller lifespan dispersion across all years.
- Holding life expectancy constant, the change in longevity variability from 2000 to 2019 would result in a 1.3% to 2.0% increase in fair immediate annuity values for the population at large, other things remaining constant. (black men with low education) to 13.6% (black men with high education).
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