Question
On average, estimates of life expectancy made using mortality tables are fairly accurate, so many companies successfully use these tables for business purposes. However, financial planners who use mortality tables to project the life expectancies of clients planning for retirement have found that their clients tend to significantly outlive the projections.
Which of the following, if true, best explains the discrepancy between the accuracy of the tables and the experiences of the financial planners?
People who hire financial planners tend to take unusually good care of all aspects of their lives, including their health.
A financial planner who makes recommendations using life expectancy predictions based entirely on standard mortality tables could cause clients to experience significant financial difficulties.
In addition to using mortality tables, many financial planners use interactive online tools to predict client lifespans.
Financial planners who base life expectancy predictions entirely on data from mortality tables are more likely to underestimate than overestimate clients’ lifespans.
Most financial planners are aware that using mortality tables can result in underestimating life expectancy, and therefore they adjust their predictions accordingly.
Text Solution:
Breakdown of the argument:
Fact 1: Life expectancy estimates made using mortality tables are fairly accurate.
Fact 2: Financial planners who use mortality tables to project clients’ life expectancies have found that clients tend to significantly outlive the projections.
Paradox: If the tables are accurate, why aren’t the planners’ projections accurate?
The correct answer explains the discrepancy in accuracy.
CORRECT ANSWER(A) People who hire financial planners tend to take unusually good care of all aspects of their lives, including their health.
This choice shows why tables that are generally accurate could be inaccurate in specific cases.
On average, mortality tables are fairly accurate. However, people who hire financial planners are not average. Taking unusually good care of their health makes these people more likely to live longer.
Thus, this choice explains the discrepancy.
(B) A financial planner who makes recommendations using life expectancy predictions based entirely on standard mortality tables could cause clients to experience significant financial difficulties.
This choice seems to follow from the passage.
If planners underestimate lifespans, then clients may outlive their retirement funds.
However, we are not looking for a conclusion. Instead, we need the answer that explains why the predictions are inaccurate.
So, this choice does not explain the discrepancy.
(C) In addition to using mortality tables, many financial planners use interactive online tools to predict client lifespans.
It makes sense that planners would use additional tools to estimate lifespans.
However, the use of other tools does not explain why lifespan estimates made using one specific tool are inaccurate.
Thus, this choice does not explain the discrepancy.
(D) Financial planners who base life expectancy predictions entirely on data from mortality tables are more likely to underestimate than overestimate clients’ lifespans.
This choice seems to follow from the passage.
If clients outlive their predicted lifespans, then those projections must be underestimates.
However, we are not looking for a conclusion. Instead, we need to explain why the predictions are inaccurate.
So, this choice does not explain the discrepancy.
(E) Most financial planners are aware that using mortality tables can result in underestimating life expectancy, and therefore they adjust their predictions accordingly.
This choice explains something other than the discrepancy.
It explains how planners avoid underestimating lifespans, instead of why unadjusted estimates are inaccurate.
Thus, this choice does not explain the discrepancy.
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