Longevity Perceptions and Drivers: How Americans View Life Expectancy
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Mortality and Longevity Longevity Perceptions and Drivers: How Americans View Life Expectancy January 2020 2 Longevity Perceptions and Drivers How Americans View Life Expectancy AUTHORS Greenwald & Associates Society of Actuaries Project Oversight Group Brian Perlman, Ph.D, CLU, ChFC Marianne Purushotham, FSA, MAAA, Chairperson SVP/Financial Services Practice Lead Magali Barbieri, Ph.D. Shing-Her Juang, Ph.D. Caroline Fauquier Donna Megregian, FSA, MAAA Research Director Larry Stern, FSA, MAAA Ronora Stryker, ASA, MAAA Amy Whinnett, FSA, MAAA Caveat and Disclaimer The opinions expressed and conclusions reached by the authors are their own and do not represent any official position or opinion of the Society of Actuaries or its members. The Society of Actuaries makes no representation or warranty to the accuracy of the information Copyright © 2020 by the Society of Actuaries. All rights reserved. Copyright © 2020 Society of Actuaries 3 CONTENTS Executive Summary .................................................................................................................................................. 4 Section 1: Individual Life Expectancy Estimations Versus Standard Actuarial Estimates ............................................ 8 1.1 OVERALL LIFE EXPECTANCY ESTIMATION .......................................................................................................... 8 1.2 COMPARISON OF RESPONDENT LIFE EXPECTANCY ESTIMATES TO STANDARD ACTUARIAL ESTIMATES .................................................................................................................................................................... 11 Section 2: Subgroups that Over- and Underestimate Life Expectancy ...................................................................... 12 Section 3: Impact of Exposure to Health and Lifestyle Longevity Drivers on Behavior .............................................. 14 Section 4: Self-Reported Health Status vs. Health Status Indicated by Responses to Health Questions .................... 16 Section 5: Caveats and Limitations .......................................................................................................................... 20 Section 6: Acknowledgments .................................................................................................................................. 21 References .............................................................................................................................................................. 22 Appendix A: Lifestyle and Health Status Responses ................................................................................................ 23 Appendix B: Demographic Breakouts ......................................................................................................................... 30 About The Society of Actuaries ............................................................................................................................... 32 Copyright © 2020 Society of Actuaries 4 Longevity Perceptions and Drivers How Americans View Life Expectancy Executive Summary People are living longer than ever before, and while this is a great societal achievement, it also introduces greater risk that individuals may outlive their financial assets. This means there is a greater need to develop a financial strategy that manages longevity risk. A key element in creating such a strategy is understanding your own potential life expectancy and the factors that can influence it. The Society of Actuaries (SOA) Mortality and Longevity Program Steering Committee sponsored a study that examines the question of how well people estimate their own life expectancy and probability of survival to different ages relative to current data and actuarial estimates. The SOA engaged Greenwald and Associates to perform the study with two primary goals: 1. to determine how realistic individuals are in their perception about their remaining length of life 2. to measure variations in perception across socioeconomic and demographic groups within the population. The study is based on an online survey of 2,012 Americans, including both pre-retirement (those ages 50–64) and post-retirement populations (those ages 65 and older). Respondents were all age 50 or older, with similar proportions in their 50s (37%), 60s (33%), and 70 and over (30%). All respondents over age 65 were retired, and all respondents below age 65 were not yet retired. Data were weighted by age, education, sex and household income to be representative of the U.S. population. The survey questions gathered data regarding respondents’ initial perceptions of their own life expectancy and their chance of surviving 10–15 years from today into the future. It then compares responses from the survey to current actuarial estimates. The current actuarial estimates were calculated by researchers using the SOA and American Academy of Actuaries (AAA) Longevity Illustrator, 1 which determines a general population estimated life expectancy based on current age and sex as well as self-reported smoking habits and health status. These standardized calculations were then compared to the individuals’ reported view of their own life expectancy and survival probabilities. Next, the survey measured changes in the respondents’ perceptions after they have been exposed to a series of health and lifestyle questions regarding factors known to impact longevity. See Appendix A for responses to individual lifestyle and health questions assessed in this study. See Appendix B for the distribution of respondents for each survey variable. 1 The Actuaries Longevity Illustrator (ALI) is a tool that the American Academy of Actuaries and the Society of Actuaries developed to provide individuals with information about their longevity. For information about ALI’s underlying mortality assumption, see www.longevityillustrator.org. Copyright © 2020 Society of Actuaries 5 Key Takeaways • Overall, findings suggest a slight tendency to underestimate life expectancy by a median of 2.0 years—with 23% overestimating and 28% underestimating by five or more years. Life Expectancy — Respondent versus Actuarial Estimates % of Respondents Respondents Estimated Within +/- 5 Years 28% 49% Respondents Overestimated by 5+ Years 23% Respondents Underestimated by 5+ Years • Of the respondents whose life expectancy estimate varied by five or more years from the standard actuarial estimate, those who considered themselves less healthy and who reported having a less healthy lifestyle were more likely to underestimate their life expectancy. Those who rated themselves higher on these dimensions were more likely to overestimate. Other research supports this finding—the U.S. Health and Retirement Study (HRS) shows that those who claim to be in good health similarly tend to overestimate their expected longevity. Self-Reported Lifestyle Self-Reported Health Status Unhealthy 29% 71% Fair/Poor 29% 71% Normal 43% 57% Good 44% 56% Healthy 58% 42% Excellent/Very Good 56% 44% 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% Overestimated 5+ yrs Underestimated 5+ yrs Overestimated 5+ yrs Underestimated 5+ yrs • Women were more likely to underestimate their life expectancy, while men were more likely to overestimate. • Those without a college degree were more likely to underestimate their life expectancy, while those with a college degree or higher tended to overestimate. • Those with lower incomes were more likely to underestimate their life expectancy, while those with higher incomes tended to overestimate. Copyright © 2020 Society of Actuaries 6 Percent of the Respondents Misestimating Life Expectancy by 5+ Years By Gender By Education Level By Household Income 100% 100% 100% 80% 46% 80% 47% 80% 46% 63% 58% 58% 60% 60% 60% 40% 40% 40% 54% 53% 54% 20% 37% 20% 42% 20% 42% 0% 0% 0% Male Female College Degree Less than College $100K and Less than or Higher Degree higher $100K Underestimated 5+ yrs Underestimated 5+ yrs Underestimated 5+ yrs Overestimated 5+ yrs Overestimated 5+ yrs Overestimated 5+ yrs There were significant portions of the population who considered themselves healthy even though their responses to questions regarding lifestyle and other longevity factors may suggest otherwise. We know for example that while 70% of the sample is overweight (as calculated using self-reported height and weight), only 57% of all respondents considered themselves to be overweight. • Even after respondents were exposed to specific questions regarding key drivers of life expectancy and survival probability, only 19% changed their initial estimates. This suggests more education is needed regarding the documented connection between those lifestyle and health drivers and longevity. • Results also suggest that most people (85%)—if confronted with information regarding behaviors or factors that could lengthen their lives—say that they would attempt to take action to change those factors. However, this study did not follow up to determine whether respondents actually would make those changes. Implications of the Study The most important finding of this study is that 51% of the U.S. population misestimated their life expectancy by at least five years—either too high or too low. • People who underestimate their life expectancy face a greater risk of outliving their financial assets and experiencing financial stress in retirement. • People who overestimate their life expectancy may not prepare properly for the care of financial dependents in the future in