Rethinking Retirement Longevity
A new white paper from HealthView Services, a leading provider of retirement cost data and planning tools, questions the common practice of planning for clients to live until age 95.
Health-Based Longevity Planning
The report, titled “Retirement Planning, Longevity & Health: Does It Make Sense to Plan to 95?” argues that most Americans are unlikely to reach this age. HealthView Services CEO Ron Mastrogiovanni suggests that retirement planning should be based on actuarial data that considers clients' health conditions.
Key Findings
- Chronic Health Conditions: 95% of Americans aged 60 or older have at least one chronic health condition that reduces their life expectancy. For example, nearly 30% of the 65-plus population with diabetes have less than a 1% chance of living to 95.
- Life Expectancy Odds: A healthy 65-year-old man has only a 19.3% chance of living to 95, while the same individual with high blood pressure has a 17.5% chance.
- Financial Impact: Overshooting longevity estimates can lead to significant financial consequences. For instance, a 65-year-old man planning for age 95 but projected to live only until 86 due to high cholesterol might be able to spend an additional $447,000 in retirement.
Balanced Approach to Longevity Risk
The report emphasizes the importance of discussing longevity risk with clients, advocating for a balanced approach that considers both the possibility of living longer and the likelihood of dying before age 95. This involves using health-based actuarial life expectancy for more accurate planning.
Health-based actuarial planning helps dynamically balance the goals of living life fully and managing longevity risk. This approach is tailored to individual risk appetites, levels of wealth, and sources of retirement income, including Social Security. This method offers a more realistic and personalized retirement planning strategy.
