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The average life expectancy in the U.S. is 77.43 years, good for the tenth-highest in the world and up noticeably over the decades. Thank advances in healthcare and medical science for that positive development and it is indeed good news.
On the other hand, the bulk of the noticeable increases in longevity in developed countries occurred over a few decades in the 20th century. Since the 1990s, those numbers have been mostly stagnant and are likely to remain that way barring significant scientific breatkthroughs. How one views the potential expansion or lack thereof of longer lifespans is an individual matter, but advisors and clients alike know that there are challenges that come with increasing longevity.
Those headwinds are particularly acute at a time when many experts describe the statement of retirement affairs in this country as a “crisis.” In many instances, retirement plans and strategies are constructed around the average life expectancy, but average is just that – average. Plenty of folks exceed that 77.43 years and they do so in good health, meaning they want to travel, spend some of their hard-earned money and just enjoy life.
Those are reasonable expectations for clients to hold, but those standards also imply the best laid retirement plans account for the increasing possibility that folks could live well into their 80s or beyond.
Planning Is Essential
Under any circumstances, a strong retirement plan and elimination of related procrastination is essential. There’s no time like the present to start and that point is amplified when accounting for rising longevity. Fortunately, there are some green shoots found in the latest iteration of the John Hancock Financial Resilience and Longevity Report.
Notably, the study finds that baby boomers are the generation most well-prepared for longer lifespans and simple math says that’s good news because they’re older than Gen X, millennials and Gen Z.
“The report suggests that the age at which a worker plans to retire (their target retirement age) depends partly on the financial resilience they're able to achieve during their working years,” according to John Hancock. “It refers to financial resilience as the ability to navigate financial obstacles such as debt, college costs, healthcare expenses, and emergencies. Workers struggling to meet their current financial needs often struggle to build this resilience and tend to delay saving for retirement.”
Again, it boils down to math. Many workers, presumably plenty that don’t work with advisors, retire earlier than they should. Then there are those that claim Social Security at the earliest possible age. Both are missteps when considering the shortening odds of living into one’s 80s or longer.
“While workers often have an age in mind, many end up retiring earlier than planned. The report indicates that 62% of U.S. retirees left the workforce sooner than expected, shortening their savings period, and extending their retirement years,” adds Hancock.
Clients Are Aware of Retirement Challenges
As noted above, a broad swath of the American workforce isn’t factoring in living longer into their retirement and Social Security plans. However, there is a silver lining in that many workers are cognizant of various retirement challenges, regardless of life expectancy.
Sixty percent of those polled by John Hancock said retirement savings is a priority, but 40% noted they’d save even more for retirement if they could eliminate or reduce or financial obligations. That’s one call to action for advisors. The study also reveals some important data about client satisfaction. Namely those working with an advisors have more positive outlooks on their retirement plans than do-it-yourself investors.
“As well, 45% of those with an advisor reported being on track for retirement savings compared to 26% who did not work with one. And 47% those with a retirement plan were on track for retirement savings vs 24% of those without one,” concludes Hancock.
Related: Forced To Retire: How Advisors Help Clients Recover and Reboot Their Lives