SQL Server 2012 - Common Table Expression (CTE) returning more rows than it should
Your problem is the anchor in the CTE returns all 120 rows instead of a single anchor row. Try this code instead, notice the WHERE clause in the CTE SELECT:

DECLARE @gender VARCHAR(10) = 'MALE'
DECLARE @interestRate NUMERIC(7, 5) = 0.0354

;WITH cte AS (
    SELECT
        lt.Age,
        CASE
            WHEN @gender = 'MALE' THEN
                lt.Male
            ELSE
                lt.Female
        END AS qx,
        CASE
            WHEN @gender = 'MALE' THEN
                lt.Female
            ELSE
                lt.Male
        END AS qy,
        CAST(1.0 AS NUMERIC(7, 5)) AS vx
    FROM LifeTable AS lt
    WHERE Age = 1
    UNION ALL

    SELECT
        cte.Age + 1,
        cte.qx,
        cte.qy,
        CAST((vx / (1 + @interestRate)) AS NUMERIC(7, 5)) AS vx
    FROM cte

    WHERE cte.Age &lt; 120

) SELECT COUNT(*) AS NumberOfRows FROM cte OPTION (MAXRECURSION 0);