For both males and females.
The average life expectancy of Americans has come down despite the efforts of the federal government to improve the health status of people, said a report published by the Society of Actuaries.
According to the study, the life expectancy of Americans has declined slightly as a result of the slower average rate of mortality improvement. For example, the life expectancy for a 65-year-old male declined to 85.8 years under the new study, compared to 86.2 years using the 2015 scale. Additionally, the life expectancy for a 65-year-old female is now 87.8 years under 2016 study, compared to 88.2 years based on the previous scale.
The important reasons for the decline are drug overdoses, suicide, alcohol poisoning, and liver disease, according to a Princeton University study issued in December.
The same trend can be seen in the case of younger Americans, baby boomers, generation X, and millennials. As per the result of last year study, a 25-year-old woman had a 50/50 chance of reaching age 90. But, this year, the chance is six months short.
The study has significance in many areas and the most important one is pension calculation. The data can be used by pension plans to assist in making forward mortality assumptions in the valuation of pension payment obligations. Based on the preliminary estimates, the new figures may reduce a pension plan’s current liabilities by 1.5-2.0 percent, depending on the individual characteristics of the plan.
“By releasing MP-2016, we are building on our commitment to regularly update the mortality improvement scale as new data becomes available,” said Dale Hall, managing director of research for the SOA. “The updated scale provides the latest information to help accurately measure pension obligations. However, it is up to pension plan sponsors, working with their plan actuaries, to determine how to incorporate emerging mortality improvement data into their plan valuations.”
But, some common methods for the estimation of longevity have several drawbacks. Despite improvements in medical science and technology, it assumes that life expectancy won’t improve over years.
The Society of Actuaries, however, assumes that life expectancy will keep improving. As per their studies, the death rates from 2000 to 2009 have improved at 1.93 percent for men and 1.46 percent for women annually. But, from 2010 to 2014 the rate came down to 0.6 percent for men and 0.42 percent for women.
Though the figures show volatility in the year-to-year comparison, in the long run, longevity will show improvement.
“Americans are generally living longer,” said Cindy Levering, ASA, MAA, and member of the SOA’s Committee on Post-Retirement Needs and Risks. “And while improved life expectancy is largely beneficial, it also increases the likelihood of prematurely depleting funds in retirement if people do not understand and plan for longevity.”