Longevity means more money is needed

The 20th century added more years to life expectancy than any era of human history before it. PHOTO: NYTIMES

(NYTIMES) - When Ms Cynthia Hutchins started her career as a financial planner in the 1980s, the concept of "retirement" was simple and straightforward.

Most of her clients envisioned a few years of leisure after their full-time careers ended, with a pension, social security and perhaps a bit of savings for steady support.

But then she noticed a shift in her conversations with clients at Merrill Lynch, where she worked as a retirement specialist.

The defined-benefit plans their parents had relied on were fading away, replaced by self-funded schemes that demanded a great deal more planning on the employee's part.

What's more, people no longer imagined their so-called retirements as a few golden years of golf and grandchildren. The 20th century added more years to life expectancy than any era of human history before it.

As the new century loomed, Ms Hutchins' clients were grappling with decisions that previous generations simply hadn't lived long enough to face. They were trying to plan for decades-long stretches that included multiple phases: leaving work to care for an ageing parent, a second career, the possibility of needing full-time care themselves.

Even in her own family, she saw how gains in life expectancy were outpacing the plans people made for themselves. Her grandmother died at 96, four decades after retiring from the Social Security Administration at age 55.

"She lived 41 years in retirement, and it hit me that had she known she had 41 years, she would have planned totally differently," she said.

That realisation prompted a career shift. Ms Hutchins, 61, is now the director of financial gerontology at Bank of America Merrill Lynch, a role in which she educates the firm's nearly 19,000 financial advisers on working with clients across all stages of life.

The training she has developed helps advisers understand the complexities that can accumulate as the years pile up: how to simultaneously finance children's college education and parents' in-home care; when to bring in adult children or other family members to collaborate on financial decisions; how to recognise if a long-term client is being financially exploited or experiencing cognitive changes that are influencing their decision-making.

"We used to live what I would call a linear life: We were born, we went to school, we got out of school, we got a job, we got married, we had kids, we retired, we died," she said. "What it's become now is a series of different life stages that we never used to have to plan for."

She added: "Doctors concerned with a patient's longevity don't just look at vital signs, but also ask about the social factors affecting their patient's health, like access to social support, adequate food and transportation to appointments."

Similarly, financial planners who have completed training in longevity know the questions to ask to make sure that their clients are on track for successful financial outcomes in older age, and that they will be comfortable starting necessary but potentially difficult conversations about long-term care, health and end-of-life plans.

The financial services sector deserves credit for at least trying to connect with the reality of older clients' lives, said Mr Paul Irving, chairman of the Milken Institute Centre for the Future of Ageing.

"The financial services industry has been struggling with this, in a good way," Mr Irving said. "I'd like to see other domains struggle in the same kind of way."

The industry still has work to do. The one-size-fits-all nature of many commercial financial products fails to account for the variability in people's lives, Mr Irving said, and being able to plan for retirement at all is still an unattainable luxury for many people in the United States.

For financial planners, however, ignoring the needs of older customers is a luxury they can't afford.

"They're seeing that this is the way they have to go, or they're not going to go at all," Ms Hutchins said. "You've got to give the client what they're asking for, and they definitely are asking for a deeper conversation than just 'What's the best investment for me?'"

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