I find the linked tables fascinating. I use them in Family Law and in Finance for Lawyers. I suggest you spend some time examining them.

https://www.ssa.gov/oact/STATS/table4c6.html

Notice that the current actuarial chance of dying within the next year is greater for males than for females at every age other than 116, 117, 118, and 119.   In some prior tables, females aged 11 or 12 had a slightly higher death rate than males; currently, 11-12-year old males have regained that unpleasant statistic.   For teenaged males, the chance of dying within the next year is two to three times that of a female.  For males aged in their early twenties — the age of most law students — the chance of dying in the next year is similarly almost three times that of females!  For example, a 23-year old male has a .1357% chance of dying in the next year, but a 23-year old female has only a .0469% chance.  Why this divergence occurs is the subject of much research: risky behavior is what appears to be the intuitive explanation.  For lawyers, I suspect the cause is less important than the number and how we respond to the number.

Notice the life expectancy for your age (male or female).  See how many people of your gender are statistically still alive.  Add your life expectancy and see how many are statistically alive at that age: it will be more than half the number today.  For example, of every 100,000 boys born 25 years ago, the tables suggest 98,120 remain alive along with 98,891 of the females.  The 25-year-old male has a life expectancy of 52.42 years (to age 77.42) while the comparable female has an expectancy of 56.76 years (to age 81.76).  That difference has important legal ramifications (e.g., tort valuations, lump sum alimony value, retirement planning, social security equity) but I want to address a different point.  [A later posting will focus on what we might do about gender, ethnic, and racial differences in life expectancy when we value losses].

According to the social security administration tables, of the 98,120 (for each 100,000 births) males currently alive at age 25 (98,891 females), 57,370 males remain alive at 77.5 (the life expectancy of the 25-year old male), which is significantly more than half.  For females, approximately 58,850 are alive at 81.75 years (the 25-year old female’s life expectancy): again, significantly more than half.  The two groups (the 25-year olds and the 77-year olds) are two different groups, but put that aside for the moment).

That demonstrates your mean life expectancy differs substantially from your median life expectancy.  As lawyers, what do we do with that information?  How do we use it in determining life expectancy in a tort case, for retirement planning, or for determining lump sum alimony in a divorce?  Should we use the mean or the median? Why?  Does it matter which side you represent?  Why?

Look at the explanation attached to the tables, particularly Figure 1.  It projects reductions in mortality through 2100.  Notice the very sharp predicted mortality reductions for males between 2015 and 2040.  From the perspective of a 62-year old male, this is particularly interesting: it suggests a substantial predicted improvement in longevity.  It also suggests, the median/mean discrepancy is expected to increase, at least in a micro sense:  we should expect significantly more than 57,370 of the current crop of 98,120 25-year old males will remain alive when they actually reach 77.5 years of age.  Similar, but less dramatic changes are predicted for females.

Why does this happen and what should we do with the information?  I suspect the mean/median divergence occurs because some people die very soon and thus lose a very large portion of their expectancy; however, very few outlive their expectancy by a large amount.  For example, a 25-year old male currently expects to live another 52.42 years; however, some will die tomorrow or next month.  In contrast, none are likely to outlive the expectancy by 52 years (they would have to pass age 130). Thus, those living long have a lesser impact on the mean than do those dying young.  A very similar analysis exists for females.

How should lawyers react?  I suspect we should focus on median life expectancies when valuing most things that are a function of a lost life, such as a tort claim.  As a practical matter, many tort cases involve lost work-life expectancy – a very different number than life expectancy – but still some will consider total expectancy.  Similarly, for retirement/estate planning, we should focus on the median rather than the mean.  No one should plan his or her retirement considering the possibility of dying in an accident in the next year – such outliers should not be part of the planning.  For family law, we value alimony streams to determine alternative lump sum awards or to measure the “totality” of a settlement or judgment.  Should we use the mean of the median expectancy for that calculation?  I suspect the answer depends on which side I represent, but my instincts say the mean is more relevant in family law.

In my experience, however, I’ve seen only cases that focus on the mean and none on the median.  I’ve never seen a case that focused on the discrepancy.  Undoubtedly, they exist, but I suspect they are rare.

On a related topic (for a later posting), lawyers should be familiar with the meaning of a “mean.”  The arithmetic mean is the simple average of a group of numbers (and that is what the social security administration appears to use).  However, the geometric, harmonic, and quadratic means are often quite different numbers than the arithmetic.  In finance, using the arithmetic mean is typically wrong, but that is for another discussion.  For now, how many law students or lawyers even know what the word “mean” means?  How many understand that using the mean can hurt your client?  Does that make it mean?

 

Steven Willis

Professor Willis's legal experience includes positions as a trial law clerk for Judge Davis (of the Fifth Circuit Court of Appeals), and as a tax/transactional lawyer with Phelps Dunbar in New Orleans. He is licensed to practice in both Florida and Louisiana and is a CPA in Louisiana. He has written numerous federal appellate briefs in tax cases, as well as cases involving religious freedom. He is an active writer and scholar. He has been a leader in developing distance learning courses with current offerings in Finance For Lawyers and Accounting for Lawyers. He is the faculty advisor for numerous student organizations including Tax Moot Court (which has won many national and international awards), VITA (which annually provides tax preparation for over 800 low-income clients), the Federalist Society Chapter (recognized nationally), and the Christian Legal Society (which provides multiple student support groups).

Professor Willis is the co-author of two traditional books: The Tax Law of Charities (2014 with Lexis) and Tax Accounting (2012 Lexis). He has also authored electronic books for Distance Learning: Accounting for Lawyers, Finance for Lawyers, and a Financial and Accounting Dictionary. His scholarship has been cited in multiple federal courts as well as many law reviews and books. He has taught law in the Netherlands, Poland, and South Africa.

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