5 Factors for Rethinking Longevity in Retirement Savings

Feb 11, 2020 Share This 

Longecity_RisksAge often denotes certain milestones in life. Traditionally, age 65 has been earmarked as “retirement age,” and people generally manage their working lives and retirement planning goals with that number in mind. 

According to the most recent data from the Society of Actuaries, seniors who are age 65 today can expect to live another 20 years or more.1 Additionally, it’s not unreasonable to consider that advances in medicine, nutrition and lifestyle choices could easily add several years in some situations. Such a reality may jeopardize a financial plan based on “expected” years of life, and put retirees in danger of outliving their savings.

As a result, those approaching age 65 may want to rethink the amount of retirement income they’ll need once they leave the workforce.

Five Essential Considerations

Having your clients solely focus on age as the predictor of possible insufficient retirement income may be shortsighted. Helping your clients better understand the myriad of factors that may influence their future finances — some in their control, some not — could prove valuable in mitigating longevity risk and developing an appropriate retirement plan. Consider the following 5 key areas:

1. Gender 

Women generally outlive men, putting the onus on them to save more for a longer period of time. This sounds simple in theory, but gender also influences pay in the years leading up to retirement. Even as cultural shifts continue to influence the gender pay gap in a positive downward direction, women still only make $0.79 for every dollar men make.2 A longer lifespan combined with fewer earnings overall could make it more difficult for them to build up enough savings to last a lifetime. 

2. Marital status 

Put simply, happily married couples have a higher probability of exceeding the average lifespan, and one or more partners is more likely to reach age 90 than single retirees.3 Many actuarial tables don’t account for this increasing reality, so it can be easily overlooked during financial planning.

3. Unexpected retirement

Most clients plan to retire between 65 and 70 years of age. However, life is seldom linear and some people retire earlier than planned. In fact, 4 in 10 retirees reported having to retire early in a recent report from the Employee Benefits Research Institute (EBRI).4 The top reasons cited included changes at their places of employment, such as downsizing, closure or reorganization, as well as health reasons and disabilities. These situations are by nature unpredictable, but even nominal considerations regarding a potential change in plans can help diminish negative consequences when developing a financial plan.

4. Timing of filing Social Security

The year in which a client is born will dictate their “full retirement age.” Ask most people who are approaching this milestone and they’ll likely tell you they’d like to retire as early as possible. Claiming Social Security benefits too soon, however, can significantly impact their income over time. When possible, waiting to claim Social Security until age 70 for full retirement will likely put the most money in your clients’ pockets on a monthly basis.

5. Long-term care expenses

According to the EBRI report, only about half of workers believe they have enough money to take care of medical or long-term care expenses in retirement, such as nursing home care.5 Their concerns are well founded. The U.S. Department of Health and Human Services reports that someone turning age 65 today has almost a 70% chance of eventually needing some type of long-term care services.6 The nationwide average daily cost of nursing home care for a shared room is $247, or about $7,500 per month, with some facilities charging much more.7 Of course, those who prefer a private room can expect those figures to climb. Not surprisingly, the potential drain on resources can happen quickly.

Making your clients aware of longevity risks is just one of many essential considerations when developing a financial plan. By helping them understand the potential implications, they’ll be better equipped to make investment decisions that align with their goals.

That’s why we developed the Managing Longevity Risk in Retirement Planning Guide to help you start the conversation with clients. In it, you’ll find various solutions, including annuities structured to guarantee post-retirement income that may help your clients succeed. Click the button below to access your copy now.

Managing Longevity Risk in Retirement Planning


1Society of Actuaries, Overview: Pri-2012 Private Retirement Plans Mortality Tables— Exposure Draft, May 2019

2PayScale, The State of the Gender Pay Gap 2019, Undated

3Forbes, Why Those In Their 40s and 50s Need To Factor Longevity Risk Into Their Retirement Planning, November 9, 2019

4,5EBRI, 2019 Retirement Confidence Survey Summary Report, April 23, 2019

6LongTermCare.gov, How Much Care Will You Need?, Undated

7American Council on Aging, Nursing Home Costs by State and Region - 2019, October 24, 2019


Topics: Client Relationships