Understanding CDC Life Expectancy Data

Jan 10, 2022 / By Elaine Floyd, CFP®

The CDC caused a bit of a stir in July 2021 when it announced that life expectancy in the U.S. declined by a year and a half in 2020, primarily due to the pandemic. This was the largest one-year decline since World War II, when life expectancy declined 2.9 years between 1942 and 1943.

According to the CDC, life expectancy at birth is now 77.3 years. At age 65 life expectancy is 17.4 years for men (to age 82.4) and 20.1 years for women (to age 85.1).

Does this mean you should change your clients’ life expectancies when running the Savvy calculators or doing financial planning? No. It’s important to understand how the CDC measures life expectancy, and indeed how any form of statistical data should be integrated into your planning for individual clients.

Remember, life expectancy data suggests the age at which the average person is expected to die. This means 50% of people will live longer than that, and 50% will die sooner. I’ve always been opposed to the use of statistical averages when planning for individual clients because they provide no clues about the experience of any one individual. They are really only useful to insurance companies and the Social Security Administration in planning for an entire population.

That said, it can be useful to understand published life expectancy data, if only to help clients know how it applies to them (or not).

The Academy of Actuaries explains. In a recent report they point out that the notion of life expectancy can be confusing because different measures of life expectancy are used in different contexts. In its 2020 report the CDC focuses on a hypothetical measure known as “period” life expectancy. While the CDC report does distinguish this measure from the “cohort” life expectancy measure that aligns with the more intuitive understanding of the metric, the CDC’s focus is on changes in period life expectancy that were largely driven by the increase in deaths attributable to COVID-19. As discussed in the paper, this focus on period life expectancy can create confusion.

Read more here: Interpreting Pandemic-Related Decreases in Life Expectancy

As director of retirement and life planning for Horsesmouth, Elaine Floyd helps advisors better serve their clients by understanding the practical and technical aspects of retirement income planning. A former wirehouse broker, she earned her CFP designation in 1986.


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