Americans now have a longer life expectancy—so their retirement assets need to last longer, too.

Two of Cam Goodwin’s clients—a married couple—recently faced a hard truth: Living just a few extra years can significantly impact your retirement expenses.

Goodwin, chief operations officer and managing partner for HawsGoodwin Financial, an independent Registered Investment Advisor (RIA) firm in Nashville, Tennessee, says his clients got a major wake-up call when they learned the husband’s elderly parents—in their 90s and living in an assisted living facility—were on the brink of outliving their retirement savings.

The couple, themselves in their late 60s, faced a double dilemma: First, they needed to rethink their financial plans so they could help support their struggling parents. Second, they realized they should plan a longer retirement period for themselves, too.

“My clients are a part of a new type of ‘sandwich generation’—they’re being squeezed to pay for care for their longer-living parents, and they’re also feeling pressure to accommodate their own increased longevity,” Goodwin says.

One smart way to find solutions for this dilemma is to work with an RIA. Don Blandin, president and CEO of the Investor Protection Trust, a nonprofit dedicated to providing consumers with noncommercial investor education and protection information, regularly advocates working with registered investment advisors because they are fiduciaries, “legally and ethically obligated to put your financial interests first and avoid any conflicts of interest.”

“In addition, RIAs can look at your entire financial picture to match your current financial strategies with your longer-term retirement goals,” he says.

And because this couple, like many clients, needed help with financial strategies—not more financial products—the choice was ideal. RIAs don’t earn commissions for buying and selling investment products. They work on a fee-only or fee-based system, so their goal and incentive is to put together a financial plan that’s right for the customer.

The good news: you’ll probably live longer

Goodwin’s clients are smart to assume they may live to an even riper old age than they thought. Americans’ life expectancies have significantly increased over recent decades. Back in 1960, for instance, people who lived to age 65 could expect to live another 13 years (men) or 16 years (women), according to the U.S. Centers for Disease Control. Today’s 65-year-olds are now expected to live another 19 to 22 years, estimates the Social Security Administration. In addition, a quarter of 65-year-olds are expected to hit age 90, and 1 in 10 will live past age 95.

Goodwin’s firm is similarly optimistic. They now create clients’ retirement plans assuming that men will live to age 91 and women to age 93.

“Overall, longevity is good news. You’re going to live longer than you thought!” Blandin says.“But the big follow-up question is: How do we financially prepare for that?”

How living longer impacts your finances

RIAs can be trusted to help investors address issues like longevity planning. After all, longer life can affect retirement planning in a number of ways:

• Retirees who “DIY” their retirement finances could get it wrong. “Pensions are an endangered species, so Americans are now handling many more complex retirement decisions than their parents or grandparents,” Blandin says. Individuals with little financial training may now choose their own retirement plans, decide how much money to contribute, select investment options and even decide on their own how much to withdraw each year so they don’t outlive their savings. “The chances for error are substantial,” he adds. However, an RIA can help clients avoid or fix potential mistakes.
• Longer retirement means more expenses. “Living even five or six years longer can be a huge financial deal,” Goodwin says. In addition to the ongoing costs of housing, utilities and other basics, retirees may also spend more discretionary money in the decades following age 65. Additional expenses could include things like travel, hobbies, new business startup costs and charitable giving. RIAs can help clients better estimate their living costs.
• Health care expenses will take a bigger bite. Studies suggest that the average healthy 65-year-old couple retiring this year will spend over $363,000 in health-related expenses in retirement.¹ And that figure doesn’t even include long-term care expenses—which aren’t covered by health insurance and could average another $266,000 throughout a retiree’s lifetime, according to the U.S. Department of Health & Human Services. Independent advisors also can help clients estimate health care costs and suggest a variety of ways to handle them.

A refreshed retirement plan

For his clients with the struggling, elderly parents, Goodwin determined that they could afford to fund three full years of their parents’ assisted living costs. In addition, he:

• Extended his clients’ life expectancies in their own financial plan to ages 95 and 97
• Added slightly more aggressive investments to their portfolio to provide for more future growth
• Helped them earmark funds to pay for 50 percent of their five grandchildren’s college expenses.

In the end, Goodwin’s clients are in good shape for a long retirement. They can also tackle other financial goals that are meaningful to them. Perhaps the happiest moment of the planning process, Goodwin recalls, was when he told his clients that their financial plan still allowed for them to buy a vacation home. “That was incredibly important to them,” he says. “They really wanted to have a place to bring their extended family together—and now they do.”

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1. “2018 Retirement Health Care Costs Data Report,” HealthView Services, 2018.

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