Stress test: the importance of longevity planning

June 24, 2016 by Katelyn Rattray

About the author

Katelyn Rattray

Senior content marketing specialist

With a background in content marketing, public relations, and social media management in a variety of industries, Katelyn strives to deliver high-quality educational content to advisors in the financial services industry and empower them with tools to boost their marketing efforts through content marketing and technology.

A successful playoff hockey team is comprised of sharpshooters, big hitters, and hot goalies. In the same way, a successful retirement plan outlines effective strategies in various areas such as saving, cash flow, and asset allocation.

However, as any avid hockey fan will tell you, the most successful championship contenders have the best conditioned athletes on the ice. So why are so many retirement plans limited to the equivalent of only three hockey periods?

Longevity planning with clients

The average American life expectancy has risen by over ten years in the last half-decade and almost 10,000 Baby Boomers are reaching retirement every day. With uncertainty about our already stressed Social Security system, as well as healthcare and transportation costs rising, can your client's plan handle an additional ten years of expenses?

According to Investopedia, “Projecting your clients’ time horizon is a vitally important factor in any competent financial plan, because it will largely determine the rate of withdrawal that they can afford to take from retirement assets after they have stopped working.”

Longevity is an often overlooked variable in a financial plan. However, in our current volatile economic environment, it needs to be evaluated in all of your client's plans.

How to begin the longevity planning conversation

Longevity planning with your clients is one of the best ways to mitigate uncertainty in outliving assets and begins with a conversation.

Where do you want to live?

Geographically, this may be simple to plan for, but more specifically, if your clients do not expect to live independently past 90 you need to plan for assisted living costs.

What do I want for my family?

Planning for education costs for children and grandchildren, as well as gifts.

What do I want for myself?

Travel, hobbies, and personal goals play a large part in financial planning and are just as important to plan for in an extended life.

These questions are not always easy to answer for clients, but are a great cornerstone for a stress-tested financial plan, as well as a strong relationship with your clients. The longevity test for clients creates a strategic advantage in planning for success.

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