- People are living longer, which will mean more time spent in retirement.
- As recently as 2016, half of people under the age of 50 had no money saved for retirement, according to the U.S. Government Accountability Office.
- For many people, saving for retirement only becomes a high priority when they turn 50.
When you think about it, the numbers are staggering.
While recently there has been a slight decrease in overall life expectancy due to increases in drug use, suicide, and liver disease,1 the big picture reveals an eye-popping trend. Someone born in the United States in 2017 has a life expectancy of 78.6 years.2 About 100 years ago, that figure was 56.4.3 That’s an increase of 39.4%. If this pace continues, the average life expectancy for someone born in 2117 will be more than 109 years.
We’re dealing with something new here. It’s not just that lifespans are getting longer, they’re getting much longer. A few generations ago, a senior citizen was someone who reached the ripe old age of 50. It seems nowadays 70 is the new 50. What’s more, retirement years should be someone’s best years, and today, one in every three 65-year-olds will live past 90; one out of seven past 95.4 Retirement could last a very long time.
What does all of this mean for your clients financially? What are the opportunities for you? More than ever, it’s important to realize longevity doesn’t just mean adding more years to their lives, it’s about adding more life to their years. It’s about asking the right questions, and appealing to their hopes — not their fears — for their families and futures.
Here are some suggestions to get started.
Numbers you should know
No one is going to be too surprised to hear a 28-year-old is more concerned with hobbies and adventures than saving. Debt also burdens many younger Americans, making it difficult to stash money away for the future.5 Clients under 50 and those in lower income brackets may need a nudge to start saving more for retirement. But living longer means there’s more time to save, and the power of compounding interest presents quite an opportunity.
Make sure your clients — especially your younger clients — understand the advantage they have when they start saving early. Because time is a powerful ally.6
If your older clients have little or nothing saved, they’re not alone. As recently as 2016, 48% of households age 55 and older had no retirement savings at all, according to the U.S. Government Accountability Office.7 According to nonprofit Transamerica Center for Retirement Studies®, the median household retirement savings among retirees age 50 and older is $75,000. Thirty-one percent of retirees have savings of less than $50,000, including 9% who do not have any savings.8
Remind clients of what they might actually need, which, chances are, is more than they’ve planned for. Total lifetime healthcare costs for a healthy 65-year-old couple retiring in 2019 were projected to be $387,644.9 People will need to financially prepare for the costs they’ll face in their later years. You can help clients determine if they’re on track with their retirement income planning with this helpful calculator.
Have the conversation now and help clients prepare for tomorrow
Clients don’t want to fear the unexpected; they want to be in control. They want to devise a plan that prepares them for the future. It’s never too soon to have that conversation.
Encourage them to have a realistic expectation of how long they’ll live, so they know how many years to prepare for. Take into account their health, gender, and daily habits instead of solely relying on averages for their life expectancy estimate. The Actuaries Longevity Illustrator is a calculator that takes these factors into consideration and is an excellent resource to pass along to clients.
After clients estimate how long they’ll live, help them create a retirement strategy that can put them in position to succeed. Consider their longevity, desired monthly income, expenses, life goals, and overall health. Teach them about tools they can use to build a well-diversified portfolio. Those tools can include investment strategies designed to grow their savings, insurance solutions to protect loved ones, and strategies to provide guaranteed income for life.
If they’re worried about not having enough saved in their retirement accounts today, here are some suggestions you can pass along via New Retirement:
- Add insurance products and ways to cover medical and care expenses
- Consider financial products that offer guaranteed lifetime income
- Work as long as possible
- Delay taking Social Security benefits
- Consider downsizing or taking a reverse mortgage
- Eliminate high interest debt
- Optimize investment strategies
- Save more and spend less
Also, get clients thinking about the need to plan for healthcare costs in retirement by sharing this article with them.
As we plan for longer lives than we once imagined, there are expectations that must be defined, challenges to confront, solutions to discover. This is an opportunity to help clients prepare for the future they deserve. This is your opportunity to help them write their next chapter.
1 “U.S. Life Expectancy Has Been Declining. Here’s Why,” CNBC.com, July 2019
2 “National Vital Statistics Reports,” Division of Vital Statistics, U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, June 2019
3 “National Vital Statistics Reports,” U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, revised March 2007
4 “Social Security Benefits Planner | Life Expectancy,” https://www.ssa.gov/planners/lifeexpectancy.html, accessed December 2019
5 “The Surprising Reason Most Workers Are Putting Off Retirement Saving,” The Motley Fool, August 2019
6 “If You Still Don’t Believe in the Power of Compound Interest, You Have to See This,” moneyunder30.com, April 2019
7 “Retirement Security: Most Households Approaching Retirement Have Low Savings, an Update,” U.S. Government Accountability Office, March 2019
8 “A Precarious Existence: How Today’s Retirees Are Financially Faring in Retirement,” nonprofit Transamerica Center for Retirement Studies, December 2018
9 “Why Health Needs To Be Part of Retirement Planning,” Healthview Services, July 2019
Transamerica Resources, Inc. is an Aegon company and is affiliated with various companies which include, but are not limited to, insurance companies and broker dealers. Transamerica Resources, Inc. does not offer insurance products or securities. The information provided is for educational purposes only and should not be construed as, medical, insurance, securities, tax, legal or financial advice or guidance. Please consult your personal independent advisors for answers to your specific questions.