STUMP » Articles » Mortality with Meep: No, Retiring Later Doesn't Make You Die Sooner... or Later » 6 July 2019, 06:42

I’ve seen this story going around, and when I saw Instapundit linked to it, I realized I finally needed to write about this.

Here is the story that has a bullshit claim about retirement and mortality:

From February 2013: Retire at 55 and live to 80; work till you’re 65 and die at 67. Startling new data shows how work pounds older bodies.

Here’s a very sobering piece from financial planner Alec Riddle, who looks at the relationship between how long you work and how long you’re likely to enjoy your retirement. Citing some interesting research, Alec argues that those who continue to work right up to the maximum retirement age tend to have shorter retirements than their peers who retire younger. This article will certainly make you think about your own retirement plans and strategy, especially if you’re like me and hoping to work until you’re 95. For regular insightful information from Biznews subscribe on iTunes to Rational Perspective, our daily Flash Briefing of global business news, more details by clicking here. – Felicity Duncan

….
Dr Ephrem (Siao Chung) Cheng provided the results from an Actuarial Study on the correlation between Retirement Age and Longevity.

“Ten working years could cost you twenty years of your Retirement!”

The studies were based on the number of Pension Fund cheques sent to Boeing retirees. The Boeing experience was that employees retiring at age 65 received pension cheques for 18 months, on average, prior to death. A similar experience was discovered at Lockheed Martin, where on average, employees received pension cheques for just 17 months.

Okay, we’re stopping right here.

Said actuarial study is not linked, one name is given, and this is from 2013. Oh, and Alec Riddle is a financial planner who is trying to drum up business. I don’t know if he’s a FIRE adherent (Financial Independence Retire Early), but he might be. I will return to the FIRE lifestyle later.

WHAT DID THAT ACTUARIAL STUDY ACTUALLY SAY

First, I cannot find this supposed actuarial study, but other, earlier articles, gave me an idea of what was in it.

Let’s check: BBC from 2012: Do those who retire early live longer?

It’s often said that early retirement lengthens your life, but is it true? And do some professions have a shorter life expectancy?

If a statistical claim is repeated often enough it can become accepted as a universal truth, even if it has no basis in fact.

….
Here’s another – the later you retire, the earlier you will die. A variation on this theme is the “fact” that, in some jobs, average life expectancy after retirement is just 18 months. We’ve seen it said of teachers, prison officers, surgeons and others.

I’m gonna break in here right now and say: if this were true, defined benefit pension plans would be having no trouble AT ALL.

A paper attributed to the aircraft-maker Boeing shows that employees who retire at 55 live to, on average, 83. But those who retire at 65 only last, on average, another 18 months.

The “Boeing study” has been quoted by newspapers, magazines and pundits. It’s circulated on the internet for years. The problem with it is that Boeing itself says it’s simply not true.

Putting Boeing to one side, then, is there any other evidence which might support the idea that retiring early prolongs life? Surprisingly, perhaps, the truth may be the precise opposite: the later you retire, the longer you live.

Epidemiologists at the oil firm Shell carried out a study of past employees in the US, which found that mortality was slightly earlier – on average – for staff who retired at 55, than for those who continued working to 65.

But the actuary Dave Grimshaw says we need to be very careful about what conclusions we draw from the Shell data. The statistical waters, he says, are muddied by the fact that people retire at different ages for different reasons.

“You will have a group who are forced to retire [early] as a result of ill health and that may impact on their life expectancy,” he says.

“In contrast there will be other people that choose to retire at 55, as more of a lifestyle decision. They may well be more affluent people. And they will also probably be in good health.”

People who retire early because they are seriously ill will make average life expectancy for all retirees of that age look lower.

There’s another statistical trap. Some of the people who retire at 55 will die before they reach 65. But of course no-one who retires at 65 will have died before they reached that age. That also distorts the data.

So that one is from 2012.

This one is from 2007: Retiring early means a longer life – an urban myth?

Dr Sing Lin, a faculty member of the King Faud University of Petroleum and Minerals (Saudi Arabia) wrote about the study in Optimum Strategies for Creativity and Longevity. He includes tables from the study by Dr. Ephrem (Siao Chung) Cheng and states:

The study was based on the number of pension checks sent to retirees of Boeing Aerospace.

People want to believe this kind of thing, so they send it on to their friends hoping to cheer themselves up.

Citing the article by Sing, this Swivel graph by Emil Valdez shows the supposedly strong correlation:

….
But the data did not add up. It was too neat and had scant authority. So I did some digging.

An article in Freiburg-Schwarzwald.de pointed out that the Boeing data is 25 years old. If so, this brings up more issues – how far back does the data go? What effect does increasing longevity have on the data?

Let’s check that linked article. It’s in German, but thanks to google translate, here is the text:

Age of retirement versus life span – Retirement age and life expectancy
…..
A 25 year-old study would indicate that pension funds in large corporations may be “over funded” —- based upon the conclusion that many “late retirees” who keep on working in their old age and retire late (after the age of 65) tend to be within two years after their retirements. This conclusion should be made in an overfunded pension fund.

The basis for this study, that has been floating around for twenty years, was provided by dr. Ephrem (Siao Chung) Cheng in the following table from an actuarial study of life. age at retirement. Boeing Aerospace about 25 years ago.

Looking at the table, I think I see the problem. I bet they didn’t include the people… who hadn’t died yet. Oh dear god. That’s a rookie mistake.

The most controversial part of the old Boeing retiree data shows that every year one works beyond age 55, one loses 2 years of life span on average for the age at retirement from 55 to 65.

18 years, on average, prior to death. These controversial statements may be read only to the older generations of retirees in the composite old Boeing retiree data. The current generation of working people in the 21st century is booming. They were much older than life, and they were much older earlier in the age range from 55 to 65.

Boeing retiree data , www.boeing.com , 16.4.2005

Okay, this German post is from 2005, they said the study was 25 years old, i.e., 1980. Uh, yeah. Mortality is a wee bit different in 1980 than 2019. Also, let’s go back to this piece:

From the Authentic Source
In Boeing’s “Let’s Retire the Rumor about Life Expectancy” [PDF, no longer available] we have the statement:

There is no correlation between age at retirement and life expectancy of Boeing retirees.

There is also a chart in that PDF document outlining actual retirement longevity data from Boeing.

Actually, this graph also needs some interpretation. What does “number alive” actually mean? If you retired at 50 and it was 30 years ago, then you could expect that you don’t have long to go. If you have only just retired, you would certainly expect to “be alive”. It says “a random sample” – but is it the same number for each age cohort? And how long ago did each person retire? Is it also evenly distributed?

Getting back to the main issue, their statement on the background to the false correlation matter is clear:

The first inaccurate life expectancy chart surfaced in the early 80s, and versions of it have been floating around for years − almost as an “urban myth.” The Internet now spreads the misinformation farther, faster, and in a more professional-appearing form. Boeing and many other companies have tried to dispel the misconception. Unfortunately, the bad news − even though it is fiction − catches people’s attention, while the good news (that Boeing employees generally live longer than the national average), is accurate but often overlooked.

So, as usual, be careful what you read.

So look, stop circulating a piece from 2013 with no links to original sources (and no, we can’t get at that Boeing study now, it seems… but if somebody knows where it is, please send it to me! Either email me: marypat.campbell@gmail.com or tweet at me: @meepbobeep and we can get something set up. Hard copies are fine.)

THE REAL WORRY: OUTLIVING YOUR SAVINGS

But back to the real retirement problem: it’s not dying too young, but dying too late.

Defined benefit pension plans are in trouble partly due to retirees living longer and longer. Not because they drop dead only a year or two after retirement.

But even so, most people in the U.S. do not have defined benefit pensions beyond Social Security… and Social Security benefits are not high. Check out the May 2019 statistics, if you’d like to check. The average payment is less than $1,500 per month. That’s not a lot of money – less than $18,000 per year. (And I’m not figuring out how much of that goes to paying for Medicare… oh, did you not know that you’d have to pay for Medicare in retirement?)

So many people have money saved up from which they need to get their full retirement income.

And how long will that last?

The Society of Actuaries have developed a variety of tools to help people plan for retirement. Here is a simple document about general steps you should take at different ages, etc.

I highly recommend trying out the Longevity Illustrator. I did a version of this years ago, but this one is easier to use.

I ran it for myself, assuming retirement at age 70:

Suppose I planned until life expectancy — that’s about 21 years after age 70 (I’m female of average health). Okay, great!

But check that 90th percentile survivorship: I could actually live 31 years (or more!). What if I had planned so my money last only 21 years? For ten years, I would be very strapped.

This is what many people are actually facing (and perhaps this is related to the very high suicide rates for old men.)

Many people who “retired early” didn’t voluntarily do so. Many found poor health forced them to retire — well, they probably have lower life expectancies, but it can still be longer than they expect. Many others “retire” because they lose a job at an advanced age and can’t find another one. There’s no reason to believe that second group has lower life expectancy.

Obviously, if you voluntarily retire early, as with the FIRE approach, you need to plan on a lifetime which could have a lot of variability in outcome. I pushed it to me retiring at age 70, and I had a difference between the 50th and 90th percentiles lifetimes was 10 years?

What if I tried it for retiring at age 50.

Okay, a difference of 11 years. Not that different. Note that my median lifetime is lower than if I retired at age 70…because it includes the possibility I died before 70 (low probability, but still non-zero).

In any case, I have seen many mortality studies, whether in context of retirement or for other purposes, and that those who retire later die earlier… did not comport with any of the mortality studies I’ve looked at.

MEEP’S RETIREMENT PLANNING ADVICE

So here is my nutshell retirement advice:

1. Realize that planning your retirement income to last only to life expectancy is foolish. Outliving your retirement income is a bigger risk than dying early.
2. Realize that you may not have as much control of deciding when you retire – whether due to job loss or health problems.
3. Plan accordingly.

I am not a financial planner, so don’t ask me to help you put #3 into action.

There are many approaches and products to help with these (disability insurance, annuities, etc.) As well, the lower your income level pre-retirement, the more Social Security and Medicare will fulfill your needs. The higher… the more you need to look at these protection products.

That’s the gist.

Also: be skeptical of any online claims, especially if you can’t get at the original blockbuster study… and you don’t know when it was from, etc.