Longevity: it’s the new buzzword in the financial planning world. How long people are going to live is a real issue that many in the industry are grappling with. It’s not just planning how long they will live, though, it’s figuring out all the moving parts during those “extra” years.
WHY YOU NEED LONGEVITY PLANNING
It’s hard to deny that we live in the most prosperous time in human history. Great strides have been made in economics, technology, and medicine that are allowing people to live longer than ever before. This trend doesn’t show signs of stopping, either. Medical advancements married with new technology will push the boundaries of aging. Some out there even theorize that the first person to live to age 1000 has already been born. With more time to live comes the need for more money to do it.
Longevity planning is creating a comprehensive strategy around those years that exceed traditional retirement times. In the past, we knew that retirement, on average, lasted about 15 years. While this is still true by and large today, it’s increasing every year. This begs the question, have you planned for the years exceeding that decade and a half?
WHAT DO I NEED TO KNOW ABOUT LONGEVITY PLANNING?
There are a lot of questions that need to be answered before your clients can retire, there are even more if we’re expecting them to live well beyond an average number of years. Many of them dealing with more than just money or finances.
It’s true that all tangential planning aspects will have some root in money, but they may not be obvious. Researching and planning for the lesser known challenges of longevity is important in painting a comprehensive picture of financial planning.
It’s fairly straightforward to say that your client will have “x” income and “x” expenditures. These often include things like health care, food, housing, etc. But have you or your clients non-obvious expenditures?
Transportation, for instance, is a major expense in the lives of an elderly person. If they don’t or are unable to drive, that leaves them reliant on others, especially if there are health concerns. In the same vein, questions should be asked if downsizing to a more walkable neighborhood would be a better option and if it affordable. Will their current housing need to be modified for lack of mobility or health complications? Will loneliness from aging in place ultimately lead to more financial expenditures than you were anticipating?
Longevity planning can feel intimidating at first, there are a lot of aspects to consider, but it’s crucial to your firm. If you haven’t given longevity planning some though already, we’re here to give you some resources and tips on how you can implement it at your firm and how you can use it to benefit your clients.