Rethinking Retirement Planning: Is Age 95 Still the Best Strategy?

Financial advisors are rethinking the industry standard of planning for clients to live until age 95, as new data suggests that chronic health conditions can significantly impact life expectancy. A recent report by HealthView Services titled “Retirement Planning, Longevity and Health: Does It Make Sense to Plan to 95?” reveals that 95% of Americans over 60 have at least one chronic condition, which can affect how long they are expected to live.

The report draws on actuarial data from 266 million cases to provide insights into the average life expectancy for healthy 65-year-old retirees, as well as those with conditions such as high cholesterol, high blood pressure, cancer, diabetes, obesity, and tobacco use. By adjusting longevity expectations based on health conditions, the report highlights the financial impact for clients and how it can influence retirement planning.

For example, a 65-year-old man who has reached his Income Replacement Ratio goal based on living until age 95, but is later diagnosed with high cholesterol, may find that adjusting his longevity expectation to 86 could potentially allow him to spend an additional $447,000 in retirement. Similarly, a 55-year-old woman with diabetes may not require the same level of savings as her healthy counterpart, as her life expectancy is significantly lower.

Ron Mastrogiovanni, CEO of HealthView Services, emphasizes the importance of using actuarial data in financial planning conversations with clients. He notes that while many clients base their expectations on their parents’ longevity, it is crucial to consider individual health conditions that can impact life expectancy. By incorporating health-based actuarial life expectancy into planning discussions, advisors can help clients make more informed decisions about their retirement savings and healthcare needs.

Mastrogiovanni also highlights the need for advisors to discuss life expectancy and health conditions with clients, as these factors play a significant role in determining financial goals and strategies. While longevity is an essential consideration in the planning process, other factors such as long-term care, legacy planning, and managing longevity risk should also be addressed.

Overall, using health-based actuarial life expectancy for planning provides a dynamic approach to balancing the goals of living life to the fullest and managing financial risks. By incorporating this data into client conversations, advisors can help clients make more informed decisions about their retirement savings and ensure they are adequately prepared for the future.

In conclusion, the report by HealthView Services sheds light on the importance of considering health conditions in retirement planning and highlights the need for advisors to have open discussions with clients about life expectancy and financial goals. By taking a holistic approach to planning that considers individual health factors, advisors can help clients make more informed decisions and achieve financial security in retirement.