77. I’m going to die when I’m 77.
I was playing around with this life expectancy calculator and dutifully filled in my personal info, dreading the results. Would I die like my dad did, from heart complications at 55? Or would I flip Death the middle finger like my grandfather who passed away at 84? It was hard to tell. On one hand, I was reasonably healthy for a 28-year-old. On the other, I was a regular drinker and wasn’t as active as I could be. I was fully expecting my number to be below 65, making all my retirement planning silly and useless, but what I got was 77. Respectable, I thought. Now that I knew, it was time to start planning for it.
Using this compound interest calculator, I punched in my current investments and contribution rate: $17,245 to start, $3,000 a year, 37 years to grow (until I’m 65), and 7% interest. The results were heartening. Even though it’s fuzzy math, it estimated $725,479 when I’m 65. Not a bad little number. I wasn’t exactly a millionaire, but I didn’t need to be. I just needed enough to carry me through to my life expectancy. Here’s what I found.
Accounting for inflation – I used 2% – I was able to adjust my $725,479 to what it’d be worth in 2053, when I’m 65. I was shocked at what inflation ate up. My spending power was only about $348,673 in today’s dollars. Since that’s the more relevant number at this point, I’m using that to calculate my retirement plan. I want to know my spending power, not some wildly-inflated, future number. You can calculate your current dollars for inflation here.
My “$348,673”, at 7% interest, gets me “$24,407” a year while it’s invested, or “$2,033” a month. That’s about in line with my current spending. I spend just over $2,000/month now. If I play my finances this way when I’m 65, I could live off my nest egg FOREVER. But let’s say for a second the financial climate of 2053 is a riskier one, and I no longer want my money invested in US equity. If I cashed out EVERYTHING – like an idiot, but I digress – I could pace my “$348,673” out to “$29,056” a year, or “$2,421” a month until an expected death at 77. I am, somehow, covered both ways! Well, that’s a relief. By sheer luck alone, I don’t have to make any alterations at all to my retirement plan! Yay!
You have the tools now in the links I’ve given you above. You NEED to run your numbers and make a retirement plan that works for you. Ignoring this post could be the difference between literal life and death. Being broke at 80 is a far different story than being broke at 25.
On a happier note, with my finances taken care of, I can now shift the focus towards health and living a longer life. Let’s look at the life expectancy calculator again. I filled it in as follows: M, 28, 5’ 8”, 180 pounds, high blood pressure, quit smoking, 3-5 drinks a day, somewhat active. My life expectancy: 77. The best way of increasing my life expectancy is to bring my exercise level from “somewhat active” to “several times per week”. New life expectancy: 81. I can go even further by bringing my alcohol consumption from “3-5 drinks per day” to “2 drinks or less per day”. My life expectancy then becomes 82. Uhh… FUCK THAT. I like my beer. One extra year is not a fair trade. More beer now.
This might be an extreme method of measuring personal finance, but it’s still a useful exercise. It took me 10 minutes to come up with the numbers you see above. If a 10-minute time investment helps you make better financial and health decisions FOR THE REST OF YOUR LIFE, wouldn’t you take it? Tell us what you thought in the comments.
With that extra four years, maybe I’ll take up scuba diving…