People are living longer, which will mean more time spent in retirement.
Forty-eight percent of workers believe they don’t make enough money to adequately save for retirement.1
For many people, saving for retirement only becomes a high priority when they turn 50.
When you think about it, the numbers are staggering.
Recently there has been a slight decline in Americans’ life expectancy, which decreased to 77 years in 2020, down 1.8 years from 78.8 years in 2019, according to the CDC.2 But the bigger picture reveals an eye-popping trend. People born in the 21st century can expect to live a century or more because their health will be unlike anything seen before in human history.
That might be hard to imagine, but in the 20th century Americans also saw a leap in lifespan. Specifically, life expectancy in the U.S. surged some 63%, to 77 years from 48.3
We’re dealing with something new here. It’s not just that lifespans are getting longer, they’re getting much longer. A few generations ago, a senior citizen was someone who reached the ripe old age of 50. It seems nowadays 70 is the new 50. What’s more, retirement years should be someone’s best years, and today, one in every three 65-year-olds will live past 90; one out of seven past 95.4 Retirement could last a very long time.
What does all of this mean for your clients financially? What are the opportunities for you? More than ever, it’s important to realize longevity doesn’t just mean adding more years to their lives, it’s about adding more life to their years. It’s about asking the right questions and appealing to their hopes — not their fears — for their families and futures. Here are some suggestions to get started.
Numbers you should know
No one is going to be too surprised to hear a 28-year-old is more concerned with hobbies and adventures than saving. Debt also burdens many younger Americans, making it difficult to stash money away for the future — two-thirds of workers with student loans say student debt is preventing them from saving for retirement. The effects are evident with 45% of millennials having less than $25,000 in personal savings.5
Clients under 50 and those in lower income brackets may need a nudge to start saving more for retirement. But living longer means there’s more time to save, and the power of compounding interest presents quite an opportunity.
Make sure your clients — especially your younger clients — understand the advantage they have when they start saving early. Thanks to the power of compound interest (the investing magic that allows investment earnings to earn interest of its own), time is the most powerful variable a young investor has on their side.6
If your older clients have little or nothing saved, they’re not alone — 49% of adults ages 55 to 66 had no personal retirement savings in 2017, according to the U.S. Census Bureau’s Survey of Income and Program Participation.7 Further insights coming from a Federal Reserve 2019 Survey of Consumer Finances (released in 2020) showed the median value of Americans' retirement accounts was only $65,000; the average, or mean, account was just over $255,000. And only 50% of families had retirement accounts at all.8
In addition, the survey noted, the proportion of workers who have saved $250,000 or more (around the average amount in the Fed's study) increases with age: 13% of Millennials, 25% of Generation X, and 40 % of Baby Boomers.8
Remind clients of what they might actually need and the associated cost, which, chances are, is more than they’ve planned for. For example, total lifetime healthcare costs for a healthy 65-year-old couple retiring in 2020 were projected to be $424,635.9 People will need to financially prepare for the costs they’ll face in their later years. You can help clients determine if they’re on track with their retirement income planning with this helpful calculator.
Have the conversation now and help clients prepare for tomorrow
Clients don’t want to fear the unexpected; they want to be in control. They want to devise a plan that prepares them for the future. It’s never too soon to have that conversation.
Encourage them to have a realistic expectation of how long they’ll live, so they know how many years to prepare for. Consider their health, gender, and daily habits instead of solely relying on averages for their life expectancy estimate. The Actuaries Longevity Illustrator is a calculator that takes these factors into consideration and is an excellent resource to pass along to clients.
After clients estimate how long they’ll live, help them create a retirement strategy that can put them in a position to succeed. Consider their longevity, desired monthly income, expenses, life goals, and overall health. Teach them about tools they can use to build a well-diversified portfolio. Those tools can include investment strategies designed to grow their savings, insurance solutions to protect loved ones, and strategies to provide guaranteed income for life.
If they’re worried about not having enough saved in their retirement accounts today, here are some suggestions you can pass along via New Retirement:
Add insurance products and ways to cover medical and care expenses
Consider financial products that offer guaranteed lifetime income
Work as long as possible
Delay taking Social Security benefits
Consider downsizing or taking a reverse mortgage
Eliminate high interest debt
Optimize investment strategies
Save more and spend less
As we plan for longer lives than we once imagined, there are expectations that must be defined, challenges to confront, and solutions to discover. This is an opportunity to help clients prepare for the future they deserve.
Things to Consider
Living longer means your clients will need more money in retirement, but that also means they will have more time to save for it.
Make sure your clients factor in all the costs they will incur in retirement, including healthcare. You can get them thinking about healthcare costs and what they will need to consider by sharing this article with them.
Also, teach your clients tools and strategies that will help them build a well-diversified portfolio to grow their savings.
1 "50+ Essential Retirement Statistics for 2022," Annuity.org, November 2021
2 “How does U.S. life expectancy compare to other countries?,” Health System Tracker, September 2021
3 “Is 100 the New Life Expectancy for People Born in the 21st Century?,” Wall Street Journal, April 2020
4 “Retirement Information for Medicare Beneficiaries,” SSA, January 2022
5 "Why Gen Z, millennial savers face America’s biggest retirement challenge, and how they can solve it," CNBC, June 2020
6 "If You Still Don't Believe In The Power Of Compound Interest, You Have To See This," Money Under 30, May 2021
7"Women More Likely Than Men to Have No Retirement Savings," US Census, January 2022
8 "Average Retirement Savings by Age Group," Investopedia, December 2021
9“2020 Retirement Healthcare Costs Brief,” HealthView Services, October 2020, ahead of publication
Transamerica Resources, Inc. is an Aegon company and is affiliated with various companies which include, but are not limited to, insurance companies and broker dealers. Transamerica Resources, Inc. does not offer insurance products or securities. The information provided is for educational purposes only and should not be construed as insurance, securities, ERISA, tax, investment, legal, medical or financial advice or guidance. Please consult your personal independent professionals for answers to your specific questions.
