Life is getting longer. But don't plan for most clients to make it to 100

Longevity risk is old news.

It’s well-established that lifespans around the world are, on average, increasing – declines seen due to the recent Covid pandemic and other factors notwithstanding. Generally, people are aware of this trend as well as the risks of being underprepared financially, a new report of survey data from around the globe shows.

But even as they’re in the know, they overestimate their financial readiness for extended lifespans, according to Geneva Association, a nonprofit whose members are leaders in insurance companies. The group recently surveyed 15,000 in 12 countries across Asia, Europe, and the Americas, finding that people in more developed countries often underestimate how long they are likely to live, while those in less developed countries do the opposite.

Since 1950, average life expectancy globally has gone from 46 years to 74 years.

“This ‘longevity revolution’ signifies remarkable progress. But it also strains health systems, which now grapple with chronic and age-related conditions. Financial security is also at risk as individuals’ savings must stretch over longer life spans,” the report from Geneva Association read. “It is thus timely to reassess priorities, including reimagining health and life insurance for a reality where savings and protection needs have changed radically.”

Technology has helped increase life expectancy considerably – and some, such as Anthropic CEO and cofounder Dario Amodei, have stated extremely high hopes for AI, claiming that it could double life expectancy in a very short timeframe.

Still, most people in good health should not necessarily plan to live to 95, as at age 65, there is only about a 19 percent chance of a man surviving to that age, currently, according to a report last year from HealthView Services.

So, should financial advisors use assumptions that all their clients will live to 100? No, says one financial planner who is also a physician.

That is in part because longevity is a complex area. And while there are various factors in technology and medicine that are working in favor of longer lives, there are other things taking away from it – such as increases in obesity starting at childhood and more sedentary lifestyles. Further, going to the doctor isn’t the same as it used to be.

“We have decimated our primary care system in this country,” said Dr. Carolyn McClanahan, founder of Life Planning Partners. Instead of addressing health issues such as obesity, hypertension, and diabetes when they first arise, such problems often progress to become chronic ailments that are dealt with in the emergency room.

“We’re not doing basic things that can improve longevity,” including promoting healthy diets and exercise, McClanahan said.

She has three buckets that clients fit into, she said. One is for those doing things that actively damage their health, such as smoking, drinking, and not exercising in any meaningful way. Another is for those with average health – they might be a little overweight and exercise occasionally. The third includes people with very healthy lifestyles and family histories of high life expectancies. People in the first bucket are most likely to live into their 70s, while those in the second often live to their mid-80s, she said. Those in the third should probably plan on living until 100. But including health into planning helps people plan according to how long they might actually live and enjoy what they can while they can.

“Advisors are afraid to ask about health. They’re afraid to take it into consideration,” McClanahan said. “We need to plan for who people are – or want to be – not who we want them to be.”