Increased longevity is a fact of life these days. But that carries special problems. Cicily Maton, a partner and senior financial planner in the Chicago office of The Planning Center, tells us what can be done about these challenges:
Larry Light: Tell us what can go wrong with more people living to advanced ages.
Cicily Maton: Let me illustrate it with a true story, a client of a fellow financial planner. It started with John—that’s a pseudonym—his wife, and their three children going to bed early in preparation for an early morning fight to the vacation of their dreams.
Instead, they were awakened by a 3 a.m. phone call from the hospital; it informed them his father was in intensive care with a brain aneurism.
As he speeds to the hospital, his wife tells the children they would not be going on vacation and that their grandfather was gravely ill.
It turns out that John’s mother also needs care. She suffers from COPD and dementia.
She is confined to a wheelchair and John’s father is the primary caregiver. Of immediate concern was to find someone to be in the house with his mother, then to sort through her numerous medications and arrange for her food.
As he sped back and forth between his parent’s home and the hospital, he had one fleeting thought about the thousands of dollars he was losing from his missed vacation. But he would have to deal with that later.
Light: What did he do next?
Maton: Once his father was out of danger, the next challenge was paying bills and trying to figure out what kind of financial resources were available.
John’s family never really discussed financial matters; they had no idea what they should do in case of an illness or death.
Somehow, John was able to muddle through, but it was causing him considerable stress.
There was one bright spot concerning the cost of the cancelled vacation. He was able to get both the airline and the resort to credit his accounts, so the dream vacation was only delayed.
The fact is this story is going to be more and more a part of our lives as we all live longer.
Light: What are the statistics on this?
Maton: I recently attended the annual Financial Planning Association Retreat last month.
One of the event’s keynote speakers was Ron Galloway, whose presentation on “age invaders” focused on two important areas: longevity and our unpreparedness for it.
He explained, “There has been a tremendous degree of growth in life expectancy. Two-thirds of all the people in history that have ever reached the age of 65 are alive today.”
In addition, the growth in life expectancy is accelerating.
Between the year 1500 and 1700, life expectancy grew by 3%. Between 1700 and 1800, it increased 8%.
Between 1800 and 1900, 9%. But between 1900 and 2000, life expectancy expanded by 42%. In 2015 there were approximately 72,000 people in the U.S who were 100 or older.
Light: But there’s a downside, right?
Maton: Don’t we all want…longer, happier, healthier, lives? Of course, we do.
The problem is that most Americans may not be able to afford to enjoy the current increase in life expectancy.
According the Northwestern Mutual’s 2018 Planning & Progress Study, “78% of Americans say they’re ‘extremely’ or ‘somewhat’ concerned about not having enough money for retirement. Another 66 percent believe that they’ll outlive their retirement savings.” For many people, outliving your savings could be a fate worse than death.
One in five Americans have no retirement savings at all.
One in three baby boomers, the generation closest to retirement age, only have between $0-$25,000 in retirement savings.
Three quarters of Americans believe it is “not at all likely” or only “somewhat likely” that Social Security will be available when they retire. Nearly half of adults have taken no steps to prepare for the likelihood that they could outlive their savings
Light: What’s to be done?
Maton: Here are some of the steps I take with my clients.
Creating a strategy for facing the financial realities of retirement begins with a frank conversation—not about money, but about life. The money conversation is important too, of course, but the first conversation should cover one’s preparedness to realize one’s goals, hopes, and dreams.
That is why it is so important to keep financial goals and results in perspective:
Prepare for your lengthening lifespan
Engage in proactive financial planning
Create financial scenarios and discuss options and possibilities
Adjust those possible scenarios for age and income
Fine-tune investment portfolios, as necessary, to meet retirement goals
Like Daniel Burnham, the Chicago architect and urban planner whose mantra was “make no little plans,” embrace the power of planning, and take pride in preparing for the transitions in life that ultimately affect us all.
From aging and retirement to illnesses and deaths, baked into all of your financial discussions should be a realistic look at what’s possible, what’s probable, and what’s inevitable.
The personal and societal implications of longevity are challenging.
Only by realistically facing your future can you make reasoned decisions about the important issues that affect your financial security.