Many Americans hope to live to 100, but are their retirement plans up to the challenge?

More than half (54%) of Americans say it’s their goal to live to 100, according to a new study from Corebridge Financial and The Longevity Project.

Family, friends, and new experiences are seen as the top benefits of living a very long life, with 72% of respondents citing continued meaningful relationships with family and friends and 65% looking for more time to explore and have new experiences.

Despite wanting to celebrate a 100th birthday, many do not expect to delay their retirement to fund longer lives. Quite a few still plan to retire between the ages of 65-69 (40%), possibly enjoying three-plus decades in retirement. While 26% believe they will need to work past 70, a smaller number (22%) expect to retire between the ages of 62-64, and only 12% between 50-61. When it comes to retiring early (ages 50-61), Generation Z is the most optimistic, with 17% seeing this as a possibility.

Financial concerns for those who live to 100

Retirees of today and tomorrow could spend more than 30 years in retirement if they do indeed live to 100, but the prospect of living a long life is tempered by financial worries, the survey said. Two-thirds of Americans (66%) fear running out of money more than death, and these concerns appear to be rooted in assessments of, and expectations for, their retirement savings.

Related findings of the survey include:

• Only 24% of respondents think that their current retirement investments will provide them with retirement income that lasts more than 30 years, or as long as they need.
• Only 27% are very confident or extremely confident that they won’t outlive their retirement savings.
• Only 36% are very confident or extremely confident in their ability to manage their retirement savings to provide income for as long as they live.

Benefits of working with a financial professional

“Living to 100 is an incredible milestone, but getting there should be cause for celebration rather than a source of financial stress,” said Bryan Pinsky, president of individual retirement at Corebridge Financial. “One of the best ways to take action is to work with a financial professional to help prepare for the future you are envisioning. That professional guidance, along with financial education and lifetime income solutions, can help you plan for and enjoy your retirement.”

According to the survey, individuals who work with financial professionals are much more likely to say their retirement readiness has increased from three years ago, with 40% for individuals who have a financial professional, compared to just 22% for those without. In addition, those who work with a financial professional are more likely to say they expect to be able to retire at an earlier age than those who don’t.

Nearly three in four respondents (72%) say having a source of guaranteed monthly income beyond Social Security payments would make them feel more confident about having enough money to live comfortably throughout retirement. Securing lifetime income is a priority for 92%, with 65% saying that it outweighs other financial priorities.

Helping clients manage longevity risk

So, what can financial advisors do to make sure that their clients do not run out of money even if they live to a ripe old age, or do achieve the iconic 100-year mark? “It is critically important that we give people a reality check, “said MDRT member Robert Cullen, insurance agent at Farmers Insurance. “Retiring at age 65 means needing to have 20+ years of predictable income. If someone has not done a good job of saving money, it's very difficult for us to create a plan that puts them at a low risk of outliving their assets. Annuities that focus on predictable income are a key component of a financial plan.”

Within that, Cullen added, advisors need to ensure that their clients’ basic needs are covered. A theory and visual that helps people understand this concept is Maslow's Hierarchy of Needs. “I draw a pyramid with 3 layers,” he explained. “The bottom layer is Social Security and/or a pension, which is for their very basic needs (food, water, shelter and some bills like a cell phone). The middle layer is the predictable income layer, provided by an annuity, and which can be used for additional living expenses. Then the top layer, typically provided by mutual funds, is labeled 'fun' or 'one-time expense' money (think vacation, new car, new roof on the house, etc.). Walking someone through that concept, along with a review of potential annuities, reduces the chance of outliving their assets.”

Additionally, one of the bigger risks in retirement is the cost of health-related services, Cullen said. So, a review of Medicare Advantage & Supplement options, along with long-term-care insurance, is another critical component. A good plan for covering health expenses helps reduce the chances of someone running out of money.

Retirees are aware of some of the risks that they face, like market risk and inflation risk, MDRT member Damon Winter, financial planner with OnMark Asset Management, LLC, said. But when they embrace the possibility of living to age 100, they must also grapple with longevity risk, or the idea of outliving their investments. Many financial planners have counseled that clients delay taking Social Security benefits as a way of helping to offset longevity risk. This can be a useful approach, he said.

Winter also said that countless financial professionals have advocated that their clients employ the use of annuities as part of their overall financial plan. As he explained, annuities can provide a guaranteed lifetime income. Therefore, if clients were to live well into their 90s and beyond, they would still be receiving income. Annuities can be a great tool to counter longevity risk.

The role of behavioral investment

For another MDRT member, Jason Smith, founder/CEO of JL Smith Holistic Wealth Management, behavioral investment is crucial. Not making bad behavioral mistakes in retirement will mitigate the risk and give the client the confidence to stay the course, he added.

If a client’s situation hasn't changed, their plan shouldn't change, Smith said. Therefore, having a written plan and having funds allocated based on the purpose and when the funds will be needed, is of the utmost importance, not only for behavioral finance, but also for the client to protect their retirement funds.

For example, Smith said, “we utilize the three-bucket approach: Now, Soon and Later. The ‘Now’ funds are your safe, liquid money. Think of this as your safety net that lets you sleep soundly; these funds won’t be invested. There's a magic number we all have of a certain amount of money that gives us confidence and peace of mind. Once we have what we need to fulfill the ‘Now’ funds, clients are willing to expand their financial portfolio and invest.”

The rest of the funds are split between the remaining buckets, Smith said. The ”soon” bucket contains funds that may be for a once-in-a-lifetime trip or a second home that the client decides to buy in retirement. They want to have an ample amount of money in the “soon” bucket so that they can take income or withdrawals, regardless of what the stock market's doing. The client does not want to be in a position where they have to sacrifice their opportunity to live the retirement they want to live because they are living out of fear, or the market just had a downturn and they don't want to take that money out to go on that vacation with the family, or whatever it might be.

The establishment of those two buckets:the “now” bucket (safe and liquid) and the “soon” bucket (for income or withdrawals, which is more conservatively invested), gives the client the ability to put the rest of the money into the “later” bucket, which is all about growth, Smith explained.

“It's about equities,” he said, “and it's about investments for the long term that are going to take on the full stock market volatility, but ultimately also get the benefits of being in the stock market, and then from time to time, you'll reload your “soon” bucket from that “later” bucket when the time is opportune. You’re never going to be in a position where you have to sell when the stock market's down. You're able to always stay the course and reload that “soon” bucket whenever we have just experienced a good time in the market.”

Last summer, Corebridge launched its Action Planner Series for individuals and financial professionals. This ongoing series provides educational resources, tools, and insights to help people take action in specific areas of their financial lives. Topics include longevity, retirement income, Social Security and Medicare, as well as content designed specifically for women. Corebridge is also the corporate sponsor of Season 5 of the Stanford Center of Longevity’s longevity podcast, “Century Lives.”

The 2023 Corebridge Financial Survey on Longevity was conducted online May 2-11, 2023, by Morning Consult, among 2,284 U.S. adults, ages 22-75, with household incomes and assets of at least $35,000 each. The Retirement, Longevity and the Future of Work Survey was conducted online April 12-15, 2022, by Morning Consult among a national sample of 2,202 U.S. adults, ages 25-75, with household incomes of at least $25,000 and at least $50,000 in investments. Corebridge Financial and The Longevity Project are not affiliated.

Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected]. 

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