A common stress we hear from advisors is the anxiety adult children in their 30s to 50s experience when talking to their parents about aging, future caregiving needs, and health changes. A significant concern in these conversations is the financial independence—or potential dependence—of their parents.

Will your clients outlive their retirement funds?

With retirement evolving significantly in recent decades, longevity has become a critical element of financial planning. With people living longer, continued inflation, and rising healthcare costs, outliving one’s retirement plan is a real concern.

This is why addressing health, longevity, and long-term care must be an integral part of every retirement planning session with senior clients. Here are some ways to initiate these important conversations.

1. Personalize Life Expectancy: The Foundation of a Solid Retirement Plan

No two clients are alike, so a one-size-fits-all approach won’t work for longevity planning. Many advisors use age 95 as a standard life expectancy in retirement projections because it’s conservative. However, more advisors are using longevity calculators to craft plans specific to each client’s health, lifestyle, and family history. This ensures that the plan reflects a more realistic life expectancy and avoids underestimating retirement needs.

When discussing longevity, consider asking questions like:

  • "If your health were to change, would you prefer to stay in your home or live in a community with peers? How would this change if one spouse were to pass away?" These questions can help clients envision their future and assist in tailoring a sustainable financial plan.

PRACTICE TIP: When considering whether to keep or surrender a life insurance asset, rely on independent experts who can value a life insurance policy based on the premiums and projected life expectancy. This process can uncover information that provides direction to planning.

2. Long-Term Care Projections: Why Longevity Matters

People are living longer—and that’s great news! But longer life spans can strain a financial plan that wasn’t designed to support decades of post-retirement living. Clients could face cash flow shortages in their later years without proper projections.

Consider a scenario where a client lives to 70 but requires long-term care in their final years. That client may spend more during retirement than a healthier individual who lives to 90 but doesn't need expensive care.

With nursing home costs averaging more than $100,000 a year, even partial reliance on Medicare and Medicaid may not be enough to cover long-term care expenses. This makes it vital to discuss health history, family health patterns, and potential longevity with your clients. It’s also essential to have open conversations about how they plan to fund care during their later years.

A conversation starter could be:

  • "How do you plan to cover the cost of long-term care? Facilities can range between $5,000 to $10,000 a month for higher-quality options."

PRACTICE TIP: You can help take pressure off the adult children by helping their aging parents repurpose their life insurance and eliminate future premium obligations to pay for caregiving needs.

3. Longevity-Related Solutions: Funding Retirement and Long-Term Care

As the longevity economy grows, an increasing portion of the population will reach advanced age, potentially placing financial strain on younger family members. It’s crucial to explore various solutions for financing long-term care and late-stage retirement needs.

One option to consider is life settlements. A life settlement allows a policy owner to sell their life insurance policy for a lump sum of cash, often much higher than the cash surrender value. This transaction provides liquidity and eliminates future premium payments, freeing up funds for retirement, investments, or care needs.

Discussing this option with your clients might sound like:

  • "Have you looked into all your options for funding long-term care? Life settlements, for instance, can provide you with greater financial flexibility by converting your life insurance into immediate cash."

PRACTICE TIP: Partner with an independent life settlement resource who has a fiduciary duty to your client and facilitates a secure policy auction that drives competition, guaranteeing the best offer.

In Conclusion

Conversations around longevity, health, and long-term care are essential for building comprehensive and realistic financial plans for your clients. By discussing these topics, you can help ensure your clients are financially prepared for a longer retirement and the potential care costs that come with it. Taking the time to understand each client’s unique circumstances will not only lead to better planning but also build trust and peace of mind for the future.