Life Expectancy

Life expectancy is often quoted at birth, but it changes as people age. Someone who has already reached 65 has survived the risks of earlier life, so their remaining life expectancy at 65 implies a total lifespan longer than the life expectancy at birth.

For example, in many developed countries, life expectancy at birth is around 80 years, while a 65-year-old may expect, on average, to live into their mid-80s. Women typically live longer than men on average.

Life expectancy is central to insurance and pensions. Life insurers use it to price policies; younger, healthier people pay lower premiums because they are expected to live longer. Annuity providers use it to calculate how much income they can pay, since they must keep paying for as long as the annuitant lives. Pension schemes and governments use it to plan retirement benefits and set state pension ages.

For personal financial planning, life expectancy is only an average. About half of people live longer than the average, and some much longer, so retirement plans should allow for the possibility of a long life, a risk known as longevity risk.