The latest thinking from Greenspring Advisors.

Blog Categories:

Financial Planning

Wealth Management

Blog Tags:

aging

financial planning

longevity

retirement

retirement planning

wealth management

Related Resources:

The Real Value of a Roth IRA

Just Breathe: Greenspring Election Day Insights

How Joe Biden’s Tax Proposal Would Impact High Net Worth and High Income Individuals

HSAs: The Holy Grail of Tax and Retirement Planning?

Seeking Better Alignment of your Money to your Goals? Try Values-Based Saving

When it Comes to Retirement Planning, Go Long!

Zack Hubbard, CFP®

In his book, The Longevity Economy, Dr. Joseph Coughlin of the MIT AgeLab makes a convincing argument for changing not only our views of retirement and longevity, but of old age in general. The research being done by the folks at the MIT AgeLab has significant implications for anyone planning for retirement, and their findings may alter the way you view and plan for your later years.

The idea of a 30 or even 40-year retirement, once an oddity, is going to become much more mainstream. The likelihood of the one or both members of a couple aged 65 living well into their 90s is higher than it has ever been (48% chance in 2015 that at least one member of a married couple aged 65 would live to 951), and those odds will keep going up due to advances in technology and medicine. It is imperative that you start incorporating longevity into your retirement planning. Be mindful of the many retirement calculators that default to the average life expectancy (85 or so). Remember, that is the average, not the end point, and the data the feeds that average includes significant outliers on the young and old side.

A good rule of thumb is to plan, at least initially, for a 25-30 year retirement. When planning for retirement, you want to make sure that your portfolio is in it for the long-haul, so better to plan for too long than too short. You all know that one story that leaves us awestruck: a person lives happily and healthily into their late 90s, still driving, travelling, living alone and visiting family. Today that is an outlier. Tomorrow that is within the range of possibilities. There are many benefits to our increasing longevity. Just an example: it is increasingly likely that you will not only see, but potentially have meaningful relationships with not only grandkids, but also great-grandkids, which was almost unheard of for previous generations.

People aren’t just aging, but they are doing so with better health than any previous generation. That means that you can still do meaningful work even after you “retire”. Retirement is no longer a hard-stop, but an opportunity to shift to something new, or more meaningful. It is also important that our plans include not only goals for the so called “go-go” years of retirement, but also the costs associated with longevity, aging in place, and plans for care as you age. These could include things like adding a ramp to your house, buying a mid-size SUV so that you don’t have to step up or down to get in and out, adding an Uber/Lyft budget when it is no longer safe for you to drive, etc. You also need to think about how long you budget for things like travel, and perhaps shifting travel goals over time. The sooner you start these conversations, the better off you (and your families) will be when the time comes.

While the benefits of longevity can lead to long and meaningful lives, there is also a dark side to the increasing longevity that warrants consideration. Age discrimination in the workplace is alive and well: a December 2019 AARP Survey found that 3 in 5 older workers have experienced workplace age discrimination. The survey also found that 76% of older workers viewed age discrimination as a major hurdle to finding a new job2. As you are continuing to age as a society, you will continue to have people working well into what you consider now to be “normal retirement age”, and workplaces will need to accommodate those people. Likewise, socioeconomic status plays a significant role in one’s ability to experience the full benefits of longevity. Research published in The Journals of Gerontology suggests that wealth is the #1 determinant in the amount of disability-free years a person lives after age 50. The researchers found that individuals in the top wealth brackets could expect to live 31-33 healthy years after age 50, roughly 9 years more than those in the lowest wealth brackets3. This research has significant implications for longevity planning, not only for the wealthy, who can expect to live with their full health until ages 81 and 83, but also for the poor and middle class members of society, who will still experience many of the benefits of longevity, but are also at risk of experiencing disability and health issues earlier due to lack of wealth and access to top resources.

While it can be challenging to plan for issues of longevity alone, you do not have to do it alone! At Greenspring Advisors, we are here to help you navigate the complexities of longevity, and start the longevity planning conversation early and often. If you are a participant in one of our retirement plans, head over to www.greenspringadvice.com and schedule a 1:1 with one of our CFP® professionals on the participant advice team. Or visit our website at www.greenspringadvisors.com and contact our Private Client team. Though you may already be well on the road to your goals, it is never too late to start up the “GPS” to make sure you stay on track.

1Social Security Administration, Period Life Table, 2015 (published in 2018), J.P. Morgan Asset Management

2The Value of Experience: Age Discrimination Against Older Workers Persists; Perron, Rebecca

3The Journals of Gerontology: Series A, Volume 75, Issue 5, May 2020, Pages 906–913