Longevity planning is fast becoming one of the most pressing aspects of retirement planning.
The reason, of course, is that people are living longer than ever before.
That not only means that our retirement money has to last us longer than it used to, but also that we have to prepare for higher healthcare costs, because living longer increases the probability that we’ll need long-term care at some point.
As a financial professional, it’s imperative to incorporate longevity planning into the retirement planning you do with your clients.
This is especially important for Baby Boomers, many of whom were hit very hard by the Great Recession. Because of that setback, seniors today may need more innovative solutions, like a life settlement, to help them meet their financial challenges in retirement.
Here are a few points to include when you discuss longevity planning with your clients.
Making retirement income last
Retirement planning has always meant making sure that your money lasts as long as it needs to.
But now that those funds will likely have to last 25 or 30 years, retirement planning has taken on a new urgency. Ensuring that your clients’ savings will outlast them, and not the other way around, requires careful, regular review of their portfolios and assets.
Willingness to research alternative options, like life settlements, and other ways to help your clients pad their retirement funds and stay solvent, is essential for financial professionals.
Planning for professional development, career changes, or education
Retirement today looks very different than it did 50 years ago. Now, you’re as likely to find a retiree exploring a new career as you are to find them on the golf course.
If your client is one of these “new retirees,” who may have an interest in pursuing an encore career, they could benefit from a discussion about potential costs associated with these pursuits.
Will he or she need professional development classes? Is he or she interested in getting an additional degree? If your client is starting a business, have they planned for a period of higher-than-usual expenses?
Going through all of these potential situations can be highly advantageous for clients who don’t want the typical retirement.
Solutions for supplementing income
If your retired client were to be in need of additional income, would he or she be able to get it?
What if your client wasn’t able to go back to work? What if he or she had to become a family caregiver for a spouse or child?
It’s vital to consider how a retiree could bring in additional money if the need arose. Life settlements, which involve the selling of an unneeded life insurance policy to institutional investors, are one highly effective solution if your client qualifies. This is often a good choice for seniors because it doesn’t necessitate any lifestyle changes.
Other options for supplementing income mainly include selling off other assets - and that could mean something as lifestyle-changing as selling the family home to move to a smaller place.
Planning for long-term care and rising healthcare costs
Any longevity planning must include planning for long-term care and healthcare costs.
The U.S. Department of Health and Human Services has estimated that by 2050, 27 million people will be using long-term care services. Thanks to our longer lifespans, it’s more likely that each of us will need long-term care at some point during our senior years.
There are several ways to plan for long-term care and/or healthcare costs. Saving, long-term care insurance, and long-term care settlements (like life settlements, except the lump sum payment is put into an account that pays the long-term care facility) are just a few.
Longevity planning is a crucial part of sound retirement planning. For more on how to be of service to your retiree clients, read “How to Help Your Senior Clients Make This Year Your Best One Yet.”