Life Expectancy

Definition and overview

Life expectancy is a statistical estimate of the average number of years a person is expected to live based on actuarial and population data. It’s widely used in finance—for life insurance pricing, retirement planning, annuities, and tax-required distributions—and by governments and health agencies to track population health.

How life expectancy is calculated

• Actuarial tables and mortality tables are built from large-scale demographic and health data.
• Estimates combine population-level trends and individual characteristics to produce expected remaining years of life at a given age.
• As you age, your remaining life expectancy can increase because actuarial calculations exclude younger people who have already died (a survival-bias effect).

Key factors that influence life expectancy

• Age and sex (two of the strongest predictors)
• Personal health and medical history
• Family medical history
• Lifestyle choices (smoking, diet, exercise, substance use)
• Socioeconomic and environmental factors, including race and access to health care

Recent trends

Overall human life expectancy increased dramatically over the past two centuries, largely due to improvements in public health, medicine, and living standards. Short-term declines can occur during crises (for example, the early 2020s pandemic and rises in overdose deaths), which affect national averages.

Life expectancy and life insurance

• Insurers use life expectancy from mortality tables as the primary input to set premiums and underwriting decisions.
• Younger applicants generally pay lower premiums because their expected time until death is longer, reducing near-term payout risk for the insurer.
• Buying insurance earlier can reduce cost and, for permanent policies, allow more time for cash value to grow.
• Underwriting also considers health status, family history, lifestyle, and other risk factors.

Life expectancy and retirement planning

• Individual life-expectancy estimates help determine how much to save, how to allocate assets, and how long savings must last.
• Couples often use joint-life expectancy when planning survivor benefits or pension transfers.
• Required minimum distributions (RMDs) for many tax-advantaged retirement accounts are calculated using IRS life-expectancy tables. The age to begin RMDs was raised from 70½ to 72 (2019) and adjusted to 73 beginning in 2023.
• Annuity choices depend directly on how long you expect to live: fixed-period payouts, single-life annuities, and joint-life annuities distribute payments differently based on expected longevity.

Average life expectancy (United States)

• Recent national averages can fluctuate due to public-health events. For example, U.S. life expectancy at birth decreased in the early 2020s amid the COVID-19 pandemic and increases in drug overdose and accident deaths.
• Life expectancy differs by sex: historically women have had higher average lifespans than men.

How life expectancy affects taxes

• The IRS uses actuarial life-expectancy tables to calculate RMDs from retirement accounts. Failing to take the full RMD may trigger a substantial excise tax on the missed amount.

Practical takeaways

• Life expectancy is a statistical tool, not a precise prediction for any single person; use personal health and family history to refine planning.
• Buy life insurance earlier to lower premiums and, for permanent policies, allow more time for cash-value growth.
• Base retirement savings, withdrawal strategies, and annuity choices on realistic projections of how long you and your partner may live.
• Monitor public-policy and tax changes that affect distribution ages and calculation methods (e.g., RMD age adjustments).

Conclusion

Life expectancy is a central input for major financial decisions—insurance timing and cost, retirement savings and withdrawal strategies, and annuity design. Understanding how it’s calculated and what factors influence it will help you make better-informed choices about insurance, retirement, and long-term financial planning.