What Is Actuarial Age?

Actuarial age indicates an individual's life expectancy on the basis of calculations and statistical modeling. Actuaries use mathematical and statistical computations to predict a person's life expectancy based on their age and gender. This actuarial age helps insurance companies more accurately develop pricing, forecasting, and planning for insurance and annuity products.

Understanding Actuarial Age

A person's actuarial age is the estimated age to which mathematical and statistical modeling techniques indicate a person will live. The actuarial age reflects factors such as present age, gender, and location. 澳洲幸运5官方开奖结果体彩网:Actuaries who assess risk for insurance companies use computerized predictive modeling to project probable outcomes for a wide variety of circumstances. This helps companies determine what premiums to charge for life insurance or the most appropriate payments from an annuity.

Determining Your Actuarial Age

The 澳洲幸运5官方开奖结果体彩💛网:Social Security Administration (SSA) provides a handy table that shows the average person's 澳洲幸运5官方开奖结果体彩网:life expectancy at various ages. For example, a person aged 60 can expect to live another 21.5 years on average. By age 70, this 澳洲幸运5官方开奖结果体彩网:actuarial life table indicates a person may live another 14.3 years.

This is a simple example of how actuaries measure life expectancy, but there's much more to it. Actuaries have algorithms that take into account many other factors, such as whether you have high blood pressure or high cholesterol, your family's health history, and more. Overall, the four major factors affecting longevity are age, gender, smoking, and health.

Your actuarial age differs from your actual longevity, or how long you are expected to live. Actuarial age reflects how long the typical person your age will probably live. Longevity provides a more personalized calculation based on more detailed information, such as your health, family history, and smoking habits. Based on these factors, you might be expected to live more or fewer years than the actuarial age. The American Academy of Actuaries and Society of Actuaries provides an online tool you can use to estimate longevity.

Consumers can use to get a rough estimate of their actuarial age. This can be useful in financial planning, such as deciding when you should retire and begin collecting Social Security benefits.

Actuarial Age Limitations

Of course, your actuarial age is not infallible. Many people live much longer or shorter lives than their actuarial age predicts. Still, when used in the insurance industry across millions of people, these numbers come very close to reality. This makes it possible for insurer💖s to charge fair prices for life insurance, annuities, and disability insurance, to name a few financial protection products.

The process gets more complicated when insurers take into account 澳洲幸运5官方开奖结果体彩网:secondary beneficiaries. These might be a spouse, second-generation beneficiaries, and young children. As with individuals, the longer the expectancy of the multiple lives involved, the cheaper the life insurance policy in general.

On the other hand, those of advanced age can expect to pay high rates for any kind of life coverage. At age 80, the SSA table estimates the average person has 8.2 years to live, so any payments collected must reflect the high probability of a payout relatively soon.

The Bottom Line

Your actuarial age indicates the average life expectancy for a person of your age and gender.🔯 Actuaries at insurance companies use this calculated age to design and price various financial products. You can also use online calculators that calculate your actuarial age to help 🦂you make financial decisions, such as figuring out how many years of retirement your savings will need to cover.