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  • Writer's pictureJade Rossback

Longevity Planning: Helping Your Clients Prepare for a Longer Future

Updated: Dec 23, 2023

Longevity is an important factor to consider when planning for one's financial future. It's crucial for financial planners to help their clients understand the possibility of living longer than expected, especially in today's world, where life expectancies continue to increase.

While not applicable to everyone, the Social Security Administration estimates that one out of every three 65-year-olds today will live until at least age 90, and one out of seven will live until at least age 95. For married couples, the chance of one spouse reaching a particular age is higher than for a single person. Advisors must help clients keep this dynamic in mind when estimating their life expectancy.

For example, if one spouse flips a coin and has a 50 percent chance of getting heads, and their spouse also flips a coin with a 50 percent chance of getting heads, then the odds that one of them will get heads is now 75 percent. This means that clients preparing for retirement should consider the possibility of living through their mid to late 90s.

With increased life expectancy comes new challenges to consider, such as higher healthcare costs, inflation, and a greater risk of outliving retirement savings. Therefore, it's essential to discuss longevity with your clients and use tools like Wealthspan's technology to analyze longevity risk by estimating one's lifespan and healthspan. Click Here to learn about the differences in life expectancy and longevity calculators and why Wealthspan's is the most accurate one available.

Discussing Longevity with Your Clients: A Necessary Conversation

You can start with a lifespan and healthspan estimation tool from Wealthspan that considers each client's unique attributes. This tool will help guide decisions about various aspects of the financial plan, such as the timing of Social Security income claiming, appropriate portfolio risk, products to be incorporated into the plan, expected income, minimizing taxes, and preparing for healthcare expenses.

The tool also provides a spousal comparison that's crucial in lifespan planning. It highlights the extended period a surviving spouse may spend alone and helps address issues like how social security and other income sources may be impacted by the death of a spouse.

Wealthspan's technology also helps advisors address the challenges of living a longer life. Discussing uncomfortable topics like immobility and age overtaking clients is essential, as they may harm their finances and lifestyle. Clients need to consider how they want to live in their late age, which includes ideal and non-ideal health circumstances, and how their wealth will sustain them during the years that exceed the traditional retirement timeframe.

It's all about preparing clients for the hidden costs of a long life and making sure their financial strategies are sustainable.

Leveraging Monte Carlo Methods to Build Your Clients’ Confidence

The top concern for people in retirement and preparing for retirement is outliving their money. Monte Carlo simulations are a powerful tool that you can use to give your clients a sense of security in their financial plan and confidence that they will achieve their retirement goals. By having the Planning Team at Wealthspan run a Monte Carlo analysis, a financial professional can project a client’s retirement through a specific age and show a plan’s probability of success at that age.

A traditional Monte Carlo simulation offers a single probability of success at a single pre-determined age, typically based on government life expectancy tables. However, by incorporating the client's specific data from Wealthspan's technology, an advisor can show their clients a more hyper-focused outcome based on their unique lifespan and healthspan, resulting in clients feeling more confident in the success of their plan, even as they consider a longer future.

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