Longevity risk continues to be a hot topic for advisors, especially as clients continue to suffer from a lack of “longevity literacy.”
TIAA Institute and George Washington University Business School Center for Global Financial Literacy Excellence Announced data A survey last week revealed that American adults are overwhelmingly ignorant of both their potential lifespan and how much money they’ll need to cover it.
Respondents were asked to identify the likelihood of a 65-year-old living to age 90 and the likelihood of dying relatively early (in this case, by age 70). Surprisingly, she got both answers correct only 12% of the time. When asked how long a 65-year-old would expect to live, only 35% correctly said 84 for men and 87 for women.
The reason this longevity research is so important to know and understand is that it helps us prepare for retirement.
For example, the survey found that 50% of respondents have already determined how much they will need to save for retirement, compared to only 32% of those with low longevity literacy. Meanwhile, 72% said they regularly save for retirement, compared to 58% of those with low longevity literacy. Finally, 69% of respondents were confident that they would have enough money to live comfortably in old age, compared to 53% of respondents with low literacy. .
David Deming, founder of Deming Financial, said he is always striving to raise the level of longevity literacy of his clients, regardless of their age.
“We just finished a review with a couple aged 84 and 83 respectively. We are concerned about the new “normal” rate of inflation going forward, and that the life expectancy of people over 80 today is measured in terms of life expectancy today, not the life expectancy of our parents’ and grandparents’ generations. We discussed the fact that it would be done,” Deming said.
Nicholas Bunio, a certified financial planner at Retirement Wealth Advisors, isn’t surprised by the findings. In his view, people tend to underestimate their lifespan by about five years. In addition, there is also a psychological dimension, given that retirees “have saved throughout their lives, have a lot of money, and want to enjoy it.”
“I don’t blame them, but we still need budgets and most people hate them,” Bunio said. “But at the end of the day, it might not feel good not to enjoy all your money, but it sucks to live to 89 and have no money at 75. If you compare, you will feel it every day.”
in fact, Recent research According to a survey by Allianz Life, 61% of Americans are more afraid of running out of money than dying.
Dean Zantes, a certified financial planner at VLP Financial Advisors, said he tends to be conservative when making plans and considers advances in modern medicine to push the age of death to at least 95. .
“Our job is to teach them how to keep their money, and that’s planning carefully,” said Zantes. “Imagine if my plan was based on this research and they were planning to live to 84, but they needed to draw out their portfolio for another 10 or 15 years. It doesn’t make me look very good.”
Another interesting way to think about time a person thinks They are Notice when they claim Social Security.
“I often talk to people who say they should wait until they are 70, but when they learn that the break-even point relative to their earnings at full retirement age is not realized until after 82, they are more concerned about their health and that of their spouse. I start to get very worried about.” You’ll never get there. This kind of thinking often leads to less than optimal decisions,” said John Swanberg, president of TSA Wealth Management.
