How Living Longer is Changing Financial Advice

How Living Longer is Changing Financial Advice

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By Joseph Coughlin, MIT AgeLab

In the last century, the American lifespan has increased beyond any historical precedent. In 1900, the average life expectancy was 47 years old. Today it is around 78, and for certain demographics — such as women with a college degree — it is closer to 85. Younger generations may be in line for even bigger longevity dividends. It’s possible that an American born in 2007 can expect to live past 100.

Some people actually fear longer lives — because they imagine more time merely means an elongated period of being “old,” with all the negative connotations that go with it. But old age, as I explain in my book The Longevity Economy, is made up. How we spend our longevity dividend is ultimately up to us. The new business of advice and retirement planning will be as much about successfully navigating these new years of old age as it is about ensuring financial security.

The emerging job of a financial advisor today is not only to manage money but to help individuals prepare for healthy living during an entirely whole new phase of life. But “healthy” encompasses far more than simply physical health. It is laying the foundations for continued engagement, social connection, and vibrant living in life after work. This nexus of health and wealth demands that advisors become conversant in longevity, not just retirement. Advisors who help clients navigate longevity will engage in conversations that span health and wealth, and have ready access to resources in a variety of domains that go well beyond today’s retirement planning, including:

Advisors seeking to provide value beyond money management will initiate conversations with clients to examine the relationship between retirement location choices and quality living in older age. For instance, while a favorite vacation spot may be an attractive place to live in retirement for a few months, will it sustain a vibrant life for many years?

Some older adults may need help simply finding places where they belong. Advisors can provide additional value by connecting clients to organizations that provide purpose and social connection. For example, referring clients to local community volunteer organizations, e.g., Habitat for Humanity. Or programs that provide both health and social connections such as SilverSneakers, an exercise program for older adults that has been shown to reduce isolation in its participants.

When we talk about “saving for retirement,” we might expand the definition toward any kind of resource that is necessary to live a good life — such as social relationships. As we age, it is in our best interest to accumulate and maintain meaningful relationships, so our later lives will be sparked with love, altruism, and companionship. Social involvement keeps us alive and thriving; it is also the key ingredient of a meaningful existence.

Advisors may find that introducing clients with similar interests or experiences will provide different types of value. First, advisors effectively become the center of a network of clients, not simply the managers of a book of business. Over time, clients may come to feel like they are more than clients but are also members of an advisor’s community. Second, clients will come to see their advisors as more than a source of financial expertise but as a trusted source of advice and support in navigating decades in retirement.

Are advisors ready to engage with clients across all the domains of longevity planning and preparedness? We are living longer and better than ever before. But our achievement in securing widespread longevity introduces new client needs and the responsibility of preparing for what is essentially a brand new phase of life in all of its facets. “Old age” is now a full quarter of the human lifespan. Unlike childhood, young adulthood, and middle age, older age in retirement has few models of what we are to do with all that time beyond golf, beach walks, and bike rides. There is a crucial opportunity here: a moment for advisors to fully embrace the role of helping people learn to envision and navigate the new retirement — a retirement made different from the old by better health, more opportunity, greater complexity and responsibility, and yes, more time.

Source and Full Article: Transamerica