Retirement Longevity Planning: An Expert’s Perspective

This fact was made clear in a recent research report by our experts and the Nationwide Retirement Institute, “Planning for a Century of Living.” The report, aptly named due to its headlining conclusion that the number of Americans living to age 100 or older could quadruple by 2054, provides powerful insights in the areas of retirement longevity planning and retirement income security — namely, that financial professionals and organizations need to adjust their retirement planning mindset to take into account rising longevity figures.

What’s more, the report found clients lack a sufficient understanding of how long they may live, which can negatively impact their retirement income security. In a survey of individuals in or nearing optimal retirement age, the report confirms a fundamental truth of retirement longevity planning revealed in our 2023 Retirement Income Literacy Study: your potential clients are unprepared for increased longevity — and that can put their future in jeopardy.

Our own Michael Finke, PhD, CFP®, one of the experts who contributed to the research, outlined his high-level conclusions from the report.

Don’t want to wait for the summary? Dive into the full report and download it now!

The Latest on Retirement Longevity Planning

While there are differences in the data between higher and lower-income households, one consistent through-line is clear: those who lack understanding of how long they may live are putting themselves at risk. According to Finke, only 27% of those surveyed in the study were able to correctly estimate the average longevity of a 65-year-old at retirement; 67% underestimated it. He points out this lack of knowledge has real impacts: those who underestimate longevity are 35% less likely to take retirement longevity planning into account and plan for spending into at least their 90s.

This understanding is critically important because research shows Americans are living longer: one-third of average-income couples and one-half of higher-income couples who reach retirement age will then have one spouse live to age 95 or beyond, as Finke explains.

In addition, failure rates for the classic “4% rule” of retirement longevity planning, in which clients are advised to stick to a 4% withdrawal of assets each year of retirement, rise by over 40% when retirement longevity planning horizons increase by just five years (from 30 to 35). And that’s assuming things go well — when using lower-than-average 10-year U.S. stock and bond returns, that failure rate increases by over 300%: a serious red flag.

“Too many people underestimate how long they’ll live — and that blind spot can seriously undermine their financial security,” Finke says.

Ensuring Retirement Income Security

So how can financial professionals ensure retirement income security as they speak with their clients about retirement longevity planning? Finke says the research shows knowledge is power, which can translate into real financial returns.

One way your clients can compensate for difficult financial conditions and buy themselves more time to save for retirement is simply delaying that retirement. This decision seems to be becoming more widespread: in fact, 76% of recent survey-takers said they planned to delay their retirement due to market volatility and fears of higher inflation.

There’s also some good news from the report, Finke says: proof that taking retirement longevity planning into account can improve outcomes. Workers who believe they have an 80% chance of living to age 75 are 88% more likely to save at least 10% of their income for retirement — making maintaining retirement income security a far better possibility — than those who have lower longevity expectations.

The bottom line? Finke says it’s important to talk about longevity with your clients — and that you’re in a unique position to help.

“We consistently see that those who plan for longevity feel more confident about retirement. The key drivers of that confidence? Working with an advisor, having access to guaranteed income, and building a plan that’s designed to last.”

Download the Full Report

More From The College

• Learn more about the Retirement Income Certified Professional® (RICP®) Program
• Download our Retirement Planning Checklist to work with your clients
• Give your clients the gift of knowledge with a free education program, The Retirement Course™