How has the variance of longevity changed over time?

Abstract

The unpredictability of one's lifespan is a major difficulty in retirement planning and provides the impetus for insurance products guaranteeing lifetime income. It is well known that this variance of longevity differs across demographic and socioeconomic groups, but the patterns of this variance over time have not been studied. This paper explores trends in the variance of longevity across groups, conditional on different starting ages, and over time, and quantifies the magnitude of differences in dollar terms using a wealth equivalence approach for a fair immediate annuity. Specifically, the analysis considers the following populations, all segregated by gender: the full U.S. population, low/high-education White and Black individuals, and annuitants. Life tables are estimated, as necessary, to supplement existing published life tables necessary to establish the life expectancy and the variance of age at death for each population. The tables are used to calculate these metrics conditional on surviving to ages 50, 62, 67, and 70, all chosen to represent pivotal ages with respect to retirement planning and policy.