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# Actuarial Age

## What Is Actuarial Age?

Actuarial age is an individual's life expectancy based on calculations and statistical modeling. Actuaries use mathematical and statistical computations to predict a person's life expectancy, or his or her actuarial age, to assist insurance companies with pricing, forecasting and planning. For instance, knowing a person's actuarial age will help determine the most appropriate payments from an annuity.

### Key Takeaways

• Actuarial age is an individual's expected life expectancy used by insurance agencies for planning and forecasting purposes.
• The number is a function of factors including age, health, and medical conditions.
• In general, the longer the life expectancy, the cheaper the life insurance policy.

## Understanding Actuarial Age

A person's actuarial age is the age to which mathematical and statistical modeling indicate a person will live. The actuarial age reflects factors such as health and serious medical conditions. Actuaries assess risk for insurance companies and use computerized predictive modeling to project probable outcomes for a wide variety of circumstances.

The Social Security Administration (SSA) has a handy table to show the average person's life expectancy at various ages. For example, a person aged 60 can expect to live another 21.5 years on average. By age 70, the table indicates a person may live another 14.3 years.

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

Consumers can use online calculators to get a rough estimate of their own actuarial age. This can be useful in financial planning and for when you decide to begin collecting Social Security, for example.

This is not to say that your actuarial age is infallible or set in stone. Many people live much longer or shorter than their actuarial age. But used in the insurance industry across thousands and millions of people, the numbers come very close to reality and make it possible to charge fair prices for life insurance and disability insurance, to name a few.

The process gets more complicated when insurers take into account secondary beneficiaries such as a spouse or second-generation beneficiaries including children. The longer the expectancy of the lives involved, the cheaper the life insurance policy in general. On the other hand, those of advanced age can expect to pay very 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.

## What do actuaries do?

Actuaries use mathematical and statistical computations to predict a person's life expectancy, or his or her actuarial age, to assist insurance companies with pricing, forecasting and planning.

## Why are actuaries needed?

They will calculate a person's so-called actuarial age, which will help determine the most appropriate payments from an annuity.

## How can I find my actuarial age?

The Social Security Administration publishes a table to show the average person's life expectancy at various ages. This is a simple example of how actuaries look at longevity. Actuaries have algorithms that take into account many other factors, for example, whether you have high blood pressure or cholesterol, your family history and more. However, the four major factors affecting longevity are: age, gender, smoking and health. Consumers can use online calculators to get a rough estimate of their own actuarial age, which might be useful in financial planning.

Article Sources
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1. Social Security Administration. "Actuarial Life Table." Accessed Oct. 5, 2021.

2. Springer Nature. "How much can we trust life tables? Sensitivity of mortality measures to right-serving treatment." Accessed Oct. 5, 2021.