Depending on what demographic you belong to, you could be living far longer than you may have expected. But the Society of Actuaries has decreased its life expectancy estimates for 65-year-olds in the U.S. by six months, and the health of middle-aged non-Hispanic white Americans is deteriorating fastest.
These trends show a widening gap between wealthier and poorer Americans. The richest people in the U.S. are getting several years of extra life and are also reaping a financial reward for their longevity. These trends will be important with any changes to Social Security, Medicare and other programs. A slight tweak to one program —like retirement age or benefit formulas—may affect the rich and poor differently. The researchers at the Society of Actuaries wanted to see how long Americans can expect to live based on their income, focusing on earnings in midcareer, from 41 to 51 and using Social Security data.
In 1980, a 50-year-old man in the wealthiest 20% of the income distribution could expect to live five years longer than a 50-year-old man in the lowest-income group. In 2010, the gap between them increased to 12.7 years. The poorest 20% of 50-year-old American men can now expect to live just past 76, six months more than the previous generation. The richest 50-year-olds should make it almost to 89—seven years longer than their parents’ generation.
An important result of this 13-year life expectancy gap is Social Security and Medicare are becoming a much better deal for well-off Americans. Thirty years ago, the richest and poorest retirees could anticipate roughly the same benefits out of government programs. The richest received larger Social Security payouts by qualifying for higher checks and by living longer. The poorest got more out of government programs. Medicare benefits were about the same for each group.
Now as wealthier people live longer, they can expect to collect a lot more from Social Security over their lifetimes than the poor. In 1980, a wealthier 50-year-old could anticipate collecting $103,000 more than a poor American. Fast forward 30 years and the gap was $173,000. This shows that Social Security is becoming less progressive over time, due to the widening gap in life expectancy.
Some theories about this notion cite rising levels of substance abuse, obesity, and suicide. Others look at how economic inequality drives health inequality. The cost of good health care has skyrocketed—even for those technically covered by insurance.
Your expected life span is a critical factor in your retirement planning and estate planning. The longer you live, the more valuable Social Security is to supplement your savings. Life expectancy trends also affect the long-term finances of entitlement programs like Social Security.