Ready to plan till age 110?

When you think about retirement in terms of being unemployed, the whole venture sounds a little scary. If you think about it as 35 years of unemployment, it’s downright frightening.

But InvestmentNews reporter Liz Skinner suggested doing just that in a recent story that featured new data added to the Society of Actuaries’ predictions about how long pension plan participants will live.

That organization uses conservative figures from the Social Security Administration, which finds a woman born in 2011 can expect to live to about age 81, while a man can expect to reach 76. That doesn’t sound so far off base, right? Until you look closer.

The longer people live, the higher the odds are that they will keep living. So once a woman hits 81, she can expect to live another nine years. A man who makes it to 76 has a good 10 years ahead of him, on average.

Average is a key word. Wealthy people tend to live longer than the average.

POTENTIAL BREAKTHROUGHS

Also, some aging experts make predictions based on yet undiscovered but likely medical breakthroughs, or those just on the cusp that aren’t in wide circulation yet (think drugs that target cancer cells, for one). Life estimates then expand dramatically. Ms. Skinner pointed out that some researchers say those born in the most recent decade are likely to face life as supercentenarians — living to 110 or older.

In these cases, does running what are traditionally considered conservative 30-year models for testing a portfolio’s survival through retirement become outdated?

Surely people will adjust over time to longer lives by working longer and hopefully saving more. And your clients currently in retirement probably won’t experience the full benefits of the medical miracles ahead, so living into their 100s won’t be common.

But it’s not far off.

And we can learn from those who do make it to advanced ages today. A recent New York Life study of people 80 and older offers an insightful fact: More than half of the octogenarians surveyed said that when they were planning retirement many moons ago, they never expected to live to the ages they’ve attained. It’s the adviser’s job to make sure they do expect it — and plan for it.