Using Biological Age to Plan Retirement

Feb 1, 2019 / Amanda Chase, Horsesmouth Assistant Editor

“Your true age is not the number of years you’ve circled the sun,’ says Moshe Milevsky, a professor of finance at York University in Toronto. “Your true age is determined by your body and scientists are working very hard how to measure this thing called biological age.” There are numerous ways of measuring biological age, but scientists, he argues, are becoming increasingly accurate in their life expectancy predictions based on it. Milevsky is the author of the forthcoming book Longevity Insurance for a Biological Age, in which he describes retirement planning using biological instead of chronological age.

Suppose a client’ parents and grandparents all died in their sixties from poor health—not from smoking or obesity, but just bad genes. Would you tell him to delay taking Social Security until age 70 because he’d receive a bigger monthly benefit? Probably not. Now suppose a client is in perfect shape and has more than one centenarian relative. Should you tell him not to worry about saving enough for retirement based on your assumption that the average age of mortality in the U.S. is 79? Of course not.

Measuring biological age could have a dramatic impact on public retirement policy. Consider that low income Americans have shorter life expectancies than middle class and wealthy Americans. The life expectancy gap between the poorest 10% of Americans and the richest 10% is more than 10 years. Should the age for Social Security eligibility really be raised when so many poor people are at a disadvantage? Or should any adjustments be based on biological age, allowing the poor to receive their benefits earlier?

Such a change would also rejigger asset allocation plans. Say a client lost thirty pounds, quit smoking and started eating healthier food. Milevsky thinks he should adjust his retirement expectations for a longer life, effectively lowering the biological age. That would mean shifting your allocation to more stocks and fewer bonds, taking on more risk for greater returns to cover retirement costs.

You can find the full Barron’s article here.

 

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