When 80 Be­comes the New 60

The key to longevity plan­ning is to be po­si­tioned as the provider of all the nec­es­sary tools, Kim­berly Foss says.

Financial Planning - - CONTENT - By Kim­berly Foss

The key to longevity plan­ning is to be po­si­tioned as the provider of all the nec­es­sary tools.

The baby boomers now en­ter­ing re­tire­ment are more ed­u­cated and more con­nected to the in­for­ma­tion uni­verse than any prior gen­er­a­tion of re­tirees.

PER­SPEC­TIVE — AND TIM­ING — ARE ev­ery­thing. In 1930, five years be­fore Social Se­cu­rity leg­is­la­tion was passed, the av­er­age life ex­pectancy of U.S. cit­i­zens was 59.7 years. 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%.

Now, those aged 65 and above make up around 12% of the U.S. pop­u­la­tion. That num­ber is ex­pected to hit 19% by 2030. And the av­er­age life ex­pectancy in the U.S. has gone up to al­most 80.

THE SE­NIORS OF THE FU­TURE

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 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 in­dus­tri­al­ized coun­tries will live to 100.

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?

OUT­COME-FO­CUSED

An­other fac­tor to con­sider is that the baby boomers now en­ter­ing re­tire­ment 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.

Boomers are four times more likely to do their own re­search on health mat­ters than their par­ents, ac­cord­ing to a re­cent Mer­rill Lynch study. These re­tirees want more than just ac­cess to ex­per­tise; they want to par­tic­i­pate in eval­u­at­ing the data rel­e­vant to their de­ci­sions.

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 a 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 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 dayto-day trans­porta­tion needs.

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.

PRO­VID­ING VI­TAL CON­NEC­TIONS

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 ad­vi­sors to help keep their ve­hi­cle in top run­ning con­di­tion.

“Fi­nan­cial ad­vi­sors now stand at a fron­tier: the new busi­ness of longevity,” says Joseph Cough­lin, di­rec­tor of MIT’S Age­lab.

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