Perspective — and timing — is everything.
In 1930, five years before Social Security legislation was passed, the average life expectancy of U.S. citizens was 59.7 years. Thus, the math worked out somewhat favorably for a program designed to pay workers a continuing income after retirement at age 65. The number of people who could statistically expect to live long enough to actually collect was pretty limited, and the percentage of people older than 65 was less than 6%.
What it means to be elderly has undergone a dramatic shift.
Today, those aged 65 and above make up around 12% of the U.S. population. That number is expected to hit 19% by the year 2030. And the average life expectancy in the U.S. has gone up to almost 80 years.
Our perspective on what it means to be elderly has undergone a dramatic shift. Indeed, the World Health Organization estimates that a typical 60-year-old today can reasonably expect not only to survive for many more years, but also to enjoy a healthy, active lifestyle for two decades or more. As technology and medical science continue to advance, we may soon receive a longevity dividend of 30 or even 40 years beyond that available to our great-grandparents. Some researchers even suggest that half of the babies born in today’s industrialized countries will live to an age of 100.
WHEN 80 BECOMES THE NEW 60
Think about this prospect: The seniors of the future are likely to enjoy two, three or even four decades of life beyond what we now consider retirement age. What possibilities does this open up? Will it change the way we think about work? About education? About health care?
Another factor to consider is that the baby boomers entering retirement today are more educated, more technically savvy and more connected to the information universe than any prior generation of retirees. They are accustomed to asking questions, looking things up and digging for answers. They also have more information available to them than ever before. A recent Merrill Lynch study reported, for example, that boomers were four times more likely to do their own research on health matters than their parents. These retirees want more than just access to expertise; they want to participate in evaluating the data relevant to their decisions.
For clients considering long-term care options, a move may be appealing if they find care options in other states that can help them save down the road.
Joseph Coughlin, director of MIT’s AgeLab, suggests that increasingly, people entering retirement are outcome-focused. Employing a metaphor first suggested by marketing theorist Theodore Levitt, Coughlin says that more and more, retirees just want the tools needed to accomplish the goals they desire. They don’t want to own a drill because they want to have a drill around the house; what they really want is a tool to create hole in the wall.
Similarly, boomers don’t really want stocks, bonds, mutual funds or insurance; they want the means to live their desired lifestyle when they are no longer actively employed. They want to solve the problems that come with longevity, and those problems, more and more, go beyond simply funding their retirement accounts.
USE THE RIGHT TOOLS
The key to longevity planning, then, is to be positioned as a provider of the necessary tools. Consider some of the problems that today’s retirees will face:
- Transitions. How will people move from a phase of life involving work and career to one featuring a slower pace, fewer hierarchical relationships, less task orientation and less day-to-day urgency? Will they opt for part-time work, either for financial support or emotional fulfillment? Will they go back to school, study a new skill or pursue a passion that previously took a backseat to career?
- Well-Being. Going beyond doctors and prescriptions, this encompasses managing chronic conditions, maintaining activity and involvement, and establishing or strengthening important interpersonal connections.
- Providing Care. Along with medical professionals, this issue includes the informal care networks that many seniors increasingly depend on, as well as the competing challenges faced by those offering the care — frequently a spouse or adult child.
- Independent Lifestyle. This aspect of retirement is fraught with complications, as anyone who has faced the necessity of convincing an aging parent of the need to move into assisted living can attest. Baby boomer retirees, especially, value their independence, but they must nevertheless reckon with the expenses of retrofitting their homes to reflect their increasing physical limitations. Alternatively, those who opt to downsize or relocate face a multitude of decisions including selling a home, buying or leasing a more desirable place to live, and managing day-to-day transportation needs.
In order to position themselves to adequately respond to the longevity needs of an aging clientele, advisors will increasingly be called upon to provide not just transaction-based assistance, but also to serve as facilitators of the relationships required to address these and other problems. We will fall short helping our aging clients if we stay in our financial silos; instead, we will need to become conduits for leading them to the solutions they require.
“Financial advisors now stand at a frontier: the new business of longevity,” says Joseph Coughlin, president of MIT’s AgeLab.
Certainly, it isn’t reasonable to expect advisors to also become experts in gerontology, physical therapy, or occupational counseling. Our deep knowledge of our clients’ situations and our ability to help them make wise choices about their financial resources will continue to be crucial. We must still be their tool for the important job of maintaining financial security.
But as the longevity trend continues, our clients will need other tools as well. Working from the foundation of our commitment to know them thoroughly, we can provide vital connections for our clients to the other tools they will need. We can form relationships with trusted, thoroughly vetted professionals in industries including housing, construction, home care and employment to help them and their children solve their problems. As AgeLab’s Coughlin notes, “Financial advisors now stand at a frontier: the new business of longevity. That business will provide them with opportunities to engage with their clients over a lifetime, on more topics, more often, and with greater intimacy.”
In many ways, this is the logical extension of the financial advisor’s mantra of “Know your client.” As our clients travel farther down the road of the longevity revolution, it will be up to us advisors to help keep their vehicle in top running condition.
