YOLO: Financial Independence and the CDC Life Tables

Early retirement is on the minds of many in the physician finance community. There are many good reasons to retire early, and one reason is that living to old age is not a given. All of us know friends or relatives who died young or well before retirement age. They may have saved diligently all their lives, dreaming of a wonderful retirement once they turned 65, only to die of a heart attack in their 40s or be diagnosed with terminal cancer in their 50s. These people may regret that they did not spend their entire lives enjoying the fruits of their labor. They aggressively saved for a future that never came.

CDC Life Tables

But what really is the chance that you’ll make it to the standard retirement age of 65? The Centers for Disease Control publishes annual life tables. These tables describe the estimated probability that a person will live to a certain age. There is a (relatively) high risk of dying in the first year of life, especially if you are born prematurely or have a congenital anomaly. After that, the risk of death starts very low and slowly accelerates with each passing year. According to the World Bank, the expected life expectancy for a baby born in the United States is nearly 79 years.

However, once you make it through infancy and childhood, your life expectancy is slightly higher. A newly-minted attending typically finishes residency at age 30. At that point, he or she is expected to live to age 82.

Let’s look at the probability that a 30-year old will live to certain ages.

Most doctors (and especially oncologists) know about Kaplan-Meier curves very well. Here are the survival curves for 30-year old men and women:

As the survival curves show, women live longer than men. The gap between the percentages of surviving women and men is most pronounced at age 80. Of course, at age 100, the curves converge, because as the famous economist John Maynard Keynes once said:

In the long run, we are all dead. – John Maynard Keynes (economist)

The odds are certainly good that you will reach retirement age, but I personally was struck by how likely it was that I won’t make it to traditional “retirement age.” Everyone assumes that they will make it to retirement, but 14% of 30-year olds don’t make it. 14% of 30-year olds will not receive much Social Security or Medicare benefits or be able to enjoy their “golden years.”

The 4% probability of dying before age 50 makes sense, but is still a bit sobering.

Of course, I suspect the average new attending physician will have a lower probability of dying by certain ages than the tables listed above. Looking at the most common causes of death by age group from the CDC, heart disease and cancer are among the leading causes of death of people in their 30s and 40s. By smoking less, being less likely to be obese, and screening for disease better, our odds as physicians should be better than the average person. Given that “unintentional injury” is the most common cause of death of people in the age groups of 25-34 and 35-44, wearing a seatbelt and avoiding risky recreational activities like extreme mountain climbing or base jumping is helpful as well.

Takeaways

Every day we have is a gift and a blessing

These tables are a sobering reminder that each day we have on Earth is a blessing and that no matter what risk-reducing interventions we do, tomorrow is not a given.

Buy term life insurance

I bought term life insurance and disability insurance as an intern, and I consider it one of my best purchases. When you see that there is potentially a 4% chance that you don’t make it to 50 and a 14% chance you won’t make it to 65, you realize how important it is to buy term life insurance. In the case of your early demise, you want to make sure that your family is taken care of financially.

Make a will

In addition to buying term life insurance, you want to write a will so that if you were to die early, your wishes about how your money is to be distributed is known. You don’t want there to be a messy legal fight over who gets your money after you die. Even worse, your money may not go to the people or organizations you want if you don’t explicitly write it in your will.

Be aggressive about saving early…

Knowing that you might not live to standard retirement age may by the “fire” you need to start saving aggressively. This may allow you to retire in your 50s, 40s, or even 30s. By retiring early, you’ll be able to have many years of retirement life even if you were to die in your 50s.

..but stop and smell the roses

Many pages of Bogleheads forum discussion have been devoted to people arguing for and against aggressively saving for retirement. After all, there are some things in life that are more enjoyable when you’re young. Your health in old age is not a given, and it’s better to do certain things (e.g. travel) while you are in peak physical condition. As the kids say these days, YOLO (you only live once), or its variant, YOYO (you’re only young once).

It’s all about balance. Physicians shouldn’t be miserable during residency and their early attending years saving every penny to pay off student loans or building net worth. By slowly increasing your lifestyle over time, you’ll be able to enjoy each phase of your life, while having a large nest egg in retirement.

Plan for a long retirement

A 30-year old can expect to live to age 90 approximately 25% of the time. Once you make it to age 65, the probability that you’ll make it to age 90 jumps to 29%. You need to plan, both personally and financially, for a possible retirement of 20 years, 30 years, or longer. There’s even a 2% chance you’ll live to age 100. By planning wisely and utilizing your secret weapon as necessary, adequately prepared physicians should be able to enjoy the fruits of their labor to age 100 and beyond.

What do you think? Were you surprised by the CDC life tables? Has the possibility of not making it to age 65 changed how you are saving or planning for retirement?