Actuary Groups Reveal Longevity Risk Assessment Tool

The new Actuaries Longevity Illustrator released by the Society of Actuaries (SOA) and the American Academy of Actuaries is billed as an easy-to-use online tool that calculates longevity risk on an individual basis and according to a variety of scenarios.

According to the groups, the Actuaries Longevity Illustrator is “available to everyone and provides the user with the likelihood of living various lengths of time, through which individuals and couples can better understand the risk of outliving their retirement income.”

Explaining the motivation for releasing the new tool, the groups observe that life expectancy is usually given as “a single number coming from a single set of assumptions, and individuals may outlive that estimate.” To combat this risk, the Actuaries Longevity Illustrator provides a range of outcomes illustrating the uncertainty of longevity risk. The American Academy of Actuaries and SOA note that there is a “significant financial risk involved in living longer than expected, which is why retirement planning should include a range of situations and risks that may be encountered.”

Ted Goldman, a senior pension fellow of the American Academy of Actuaries, says the initial idea of making an interactive illustrator tool available as a public service began several years ago, “when we noticed that retirees, and those planning for their retirement, did not have access to information that objectively breaks down the nature of longevity risk that can be readily understood both from a conceptual standpoint and operationally for those who are considering retirement income options.”

As such, the groups designed the Actuaries Longevity Illustrator to “help plan for the possibilities of surviving to a range of different ages both for individuals and couples,” concludes Andrew Peterson, senior staff fellow of retirement systems at the SOA. “Life doesn’t fit into just one scenario or age to reach in retirement. Instead, people should plan for a variety of outcomes—living shorter or longer than expected.”

The tool is accessed directly online at www.longevityillustrator.org.