Read time: 3-minute article

Are your clients’ finances ready for a longer life?

This content is categorized as:

The life expectancy rates for Americans at birth are approximately 75.1 years for men and 80.5 for women, according to a report from the National Center for Health Statistics, a part of the Centers for Disease Control and Prevention. That means couples turning 65 can expect to live together in retirement for another 19 years, on average, but potentially longer.

Preparing for retirement is by far the largest financial goal in many people’s lives, and thinking about saving enough money to last 15, 20 or more years may leave some individuals unsure how to get there. Everyone’s expenses and income streams in retirement will be different, but one traditional rule of thumb suggests pre-retirees save $1 million to $1.5 million.

Some financial professionals are starting to question these numbers, instead focusing on personal retirement-budget needs rather than aiming for an umbrella value. One current school of thought recommends that an individuals’ retirement income should equal 80 percent of the annual salary at the age an individual stops working. Someone earning $100,000 annually at retirement, for example, should plan at least $80,000 a year to live comfortably in retirement. Some experts also suggest using the 4 percent rule to estimate the total nest egg people may need before trading in the office for a sailboat. In this example, that means a $2 million retirement nest egg. Keep in mind this $2 million does not account for any government or employer provided retirement benefits.

As a financial professional, helping individuals and families fill the gaps in their savings will be essential to their stability in retirement. Especially for individuals who will live in retirement for 30 or even 40 years. Here are a few tips to help your clients prepare.

"How long will I live?"
People face a number of uncertainties when they think about their own retirement, according to “Solving the Annuity Puzzle,” a review of research commissioned by Athene from scholars at the UCLA Anderson School of Management. Individuals are uncertain about how long they’ll live and how much money they’ll need to cover that time. Because these answers are unclear, people are more likely to avoid the questions, the research shows. Additionally, when faced with the possibility of investing in an annuity, thinking about death tends to make some people’s own demise seem more inevitable, leading to anxiety and avoidance.

Repositioning annuities
Annuities can help stretch savings in a way that benefits a longer life. But to avoid the uncertainty individuals may feel about their mortality, there are specific ways you can emphasize just how beneficial annuities can be.

  • Talk life, not death. Instead of focusing on mortality, pivot your conversations to the life that’s left — show how annuities can help people maintain financial independence over the long run, giving them better peace of mind. Stay positive.
  • Scheduling the purchase in the future. When you talk to clients about lump-sum distributions or rollovers from other retirement accounts, include annuities as one of the possible choices for using those funds. If your clients have a longer runway to retirement, consider helping them set a future date to reevaluate their needs and determine if an annuity is the right choice. This can help educate clients about how their money can work for them in the long run, and help offset the feeling of making an active choice and “tempting fate” with their purchase.
  • Bring in their future. Individuals are more likely to think about how much money they will need in the future if they also think about how they may feel in the future. Presenting clients with a realistic vision of their future selves as, say, 95-year-olds will help them see the importance and emotional impact of financial security at that age.

Get started today

Make a list of clients who are nearing retirement and schedule meetings to review their savings with them. During those conversations, start talking about longevity and life expectancy.

This information is brought to you by Athene — where innovative annuity solutions are powered by unconventional thinking.