Life expectancy needs more weight in retirement planning

By Emily Hutto

ProducersWEB


If they haven't already, it's time for advisors to incorporate a life expectancy element into their pitches and the literature they create about their practices.

The many studies revealing that Americans aren’t ready for retirement are old news. Either they aren’t confident in their ability to save enough money for retirement, or they aren’t educated about the various retirement products available. One of the latest studies by the Society of Actuaries (SOA) reveals that in addition to lacking preparation for retirement, Americans are also underestimating how long they’ll actually live.

Four in 10 Americans, says the study, underestimate their life expectancy by five or more years. It makes the following points about our longevity:
  • Life expectancy for newborn American males increases by two years each decade.

  • By age 65, U.S. males in average health have a 40 percent chance of living to age 85. Females have more than a 50 percent chance.

  • A healthy 65-year-old male can expect that 80 percent of his remaining lifetime will be spent non-disabled, 10 percent in mild to moderate disability, and another 10 percent in severe disability. Healthy females can expect 70 percent of their remaining lifetime to be spent non-disabled, 15 percent moderately disabled and another 15 percent severely disabled.

The SOA report confirms the unpreparedness of Americans for retirement. It found that only 60 percent of retirees and only 35 percent of pre-retirees have plans for how much they plan to spend in retirement each year, and where that money will come from.

This report is concerning, to say the least. It’s a red flag for advisors who are already working to educate their potential clients about retirement readiness. Now it seems they’ll have to incorporate a life expectancy element into their pitches and the literature they create about their practices.

Are you already educating your customers and potential clients about life expectancy? How do you do it?