Ep # 100: What If I Live To Age 100?

Benjamin Haas | May 26, 2023

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Benjamin Haas 00:03

Hi everyone and welcome to A/B Conversations, where we will help you CFP your way out of it. A podcast where you get into the minds of a couple of Certified Financial Planners on how we think and feel about everyday financial planning questions and what should really matter most to you. A healthier financial life starts...now!

Adam Werner 00:25

Hello there, Ben.

Benjamin Haas 00:30

Hi Adam. How are you doing today?

Adam Werner 00:32

Doing fine. Today is, well, I don't know if it's recording number 100 but in terms of published episodes, this will be our 100th podcast!

Benjamin Haas 00:47

We should be like pros, experts by now.

Adam Werner 00:50

We should be.

Benjamin Haas 00:51

Practiced experts.

Adam Werner 00:54

Yeah, I don't know, every time we record them just it feels like it's fresh but that's part of the intent.

Benjamin Haas 01:01

The title is AB conversations. It's just supposed to feel like another day, another conversation. It just happens to be the 100th time we're going to do it, formally.

Adam Werner 01:12

Which is kind of crazy to think about. I don't know if you've reflected on it but to have done 100 of these is a little bit out of the realm of what I would have considered possible a couple of years ago before we even started this or even when we did start it.

Benjamin Haas 01:30

Well, I'll reiterate, I have a lot of fun doing it so if it's helpful to put it out there in the universe, then wonderful, but I think it's a good exercise for us too.

Adam Werner 01:40

Now I'm just thinking on the fly. If we've done 100 of them and they averaged maybe 20 minutes apiece, is my math correct? Is that like 2000 minutes of our voices? Oof, that is scary. Yeah, it has to be.

Benjamin Haas 01:56

Yeah, it's like 33 hours.

Adam Werner 02:00

Okay, so great. On that note for anybody who's listened to all of those, please let us know. We'll have to commemorate that in some way, shape, or form.

Benjamin Haas 02:12

You deserve a prize.

Adam Werner 02:14

Exactly, exactly. But in conjunction with our 100th episode, we thought it'd be a fun idea if we kind of loop that back to planning, shocker, but with a specific twist. What if somebody lives to the age of 100? What planning considerations or strategies would go into preparing for such a reality?

Benjamin Haas 02:40

Yeah, I think back to if you recall that presentation that we used to do as part of Ameriprise before we decided to no longer be there. Do you remember that? It was called confident retirement?

Adam Werner 02:53

Yes!

Benjamin Haas 02:53

And there were six different risks and this will, I promise we'll put it in compliance. There's a survey done every year, Retirement Confidence Survey, and there's a couple different risks that retirees and pre retirees are very aware of, you know, health care was number one, unexpected events were two, longevity was three. It's crazy to think, but living to age 100 can be a huge stressor in your plan because all of those other risks as you age, there's more likelihood you're going to have more healthcare, more unexpected events can pop up. Your withdrawal rate matters. I mean, we're going to go into some of these but longevity ends up being the risk that makes and amplifies all the other risks so much more. So yeah, great exercise today, let's go through planning concepts and strategies if you live as we hope everyone does this long and healthy life.

Adam Werner 03:49

It's interesting to think about a lot of people's concerns when they think about retirement and planning for retirement is making sure they don't run out of money. That's usually one of the first things that is talked about. But the flip side of that, even though I think it's the exact same conversation, but just looking through a different lens of not what if I run out of money, but what if I outlive my money? Just if I live a long and healthy life, am I financially prepared for that? Even though I think it's the exact same question, just two different lenses thinking that living a long time is potentially a risk.

Benjamin Haas 04:33

Because more often than not, when we have these conversations with clients, they I think more often than not, they'll tell us. I'm not going to live until 95 I'll be lucky to live until 90. Yet how their mom and dad doing, 85-90 and maybe we can go into some of it. The reality is life expectancy is going up and there's many different reasons for that. But it does put the onus on us to plan for that and I think you said it well. If the whole idea is to make sure I don't outlive my money, well, there's two different ways to look at that but no matter how you look at it, we need to plan for that.

Adam Werner 05:08

Right? So then let's dive in and we'll start with just a general overview of life expectancy historically, just to give some context. According to the CDC, life expectancy in the year 1900, a short 123 years ago, in the US, was 47 years old.

Benjamin Haas 05:33

I'm almost there.

Adam Werner 05:34

Putting us solidly in our twilight years, if we were born in 1900. By 1950, that had bumped up all the way to age 68 being the average. And as of 2020, the average is now 76. Slightly more for females than it is for males. Females close to 79 and males like 73, age 74. But quite a shift from 100 years ago, a century ago. But even though that average is in the 70s now, as you said earlier, we've had many conversations with clients and just asking about longevity in their family. We've heard a lot of mom and dad or one of each are still doing well into their 90s, relatively healthy, some still independent in their own home at that age. So, you can't necessarily plan on the averages when it comes to something like this. Again, it's better to be prepared than not, obviously but when it comes to living a long and healthy life, I've heard from many. It's been a while, but I've heard from many clients, you know that and this has always stuck in my head, just make sure that I'm not eating cat food when I'm 90 to be able to survive.

Benjamin Haas 07:07

Yeah, and that's where the strategies need to come into play. I think the first one because it does tie back to your point, like people don't want to run out of money. They don't want to feel like their whole lifestyle or what would make them happy is completely compromised in their last years. It does come back to saving and I realized that's like the obvious response. But I want to dig a little bit deeper into generation before us were working for companies that more often than not put out a retirement plan on behalf of their employees. We call that defined benefit plans, pension plans, right? They set aside money or they force you to set aside money and then when you retire here, you've got your benefit, and you've got Social Security and now here's your retirement. Well, you know, fast forward, we're now not in defined benefit plan age. We're in defined contribution plans. The onus is on you, you the individual to save and put money into these retirement plans 401k's, 403b's to support you. I think the longer you live, and the more that you're having to withdrawal from something like that, the pension plan is there to be there until you pass away. The defined contribution plan, your savings that can dwindle and it can dwindle quickly. So, number one is just to recognize that it does, especially for people that are still working. The onus is now on you to continue to save and make sure that you're doing your best to have that money grow over time.

Adam Werner 08:35

Yeah. I think that's a great point, I don't want to say it's a simple shift but just that shift in the retirement savings landscape puts most of the pressure on the person, on the participant or the employee to do all of that savings for themselves. In the scenario where in the past you had a pension, you had Social Security, you had a bit of a floor in terms of income. As long as you could live within that and you had other savings, you are good. But you've removed out a good chunk of guaranteed income and now you have to replace that in some way, shape or form. As you said, that has to come from savings and even if you've been a good saver, I think the idea we did a podcast on this, just flipping the switch in retirement of now how do I recreate my paychecks. Getting a steady pension, it's predictable. In retirement, if you don't have a pension, you're just recreating it from your savings. It can add a lot of variability into that equation that just for many people, when there is that level of variability in investments, returns, income, taxes, it just adds layers of uncertainty that doesn't feel good.

Benjamin Haas 10:04

Yeah, and opportunity for something to go wrong and this ties into another point. I think I mentioned it, when you think confidence in retirement, one of the things that people worry about, even before last year was just inflation. It's important to understand what that means in this context of this conversation. Savings versus fixed benefits, like a pension or Social Security. Most pensions don't have a cost-of-living adjustment. Social Security, we get cost of living on that but sometimes we would make the argument, it's maybe not as much as your expense is going up. So, think about what that means with longevity. You retire at 65 with a pension, that's $3,000 a month. That's going to be $3,000 a month at age 90, and at 95. And then right, for the title of the podcast - now 100. So, the purchasing power of that goes down every year and the longer you live, it's going to feel like it's going down more and more and more. So moral of the story, you have to be able to save outside of it. You have to be able to have something that can keep up with inflation.

Adam Werner 11:10

Yeah. So then let's talk about those things and I think we already kind of touched on two of the three initial ones that we had noted. Inflation is a hurdle for everybody. The savings side of it on the front end and then I think for many people, when they get to retirement, it's the unknown, of potential medical expenses. What am I not only going to need to cover from my savings just to meet my needs, but it's the unknown in the future of if I have a health event or even if you live a long and healthy life, medical expenses are inflating as well. As this baby boomer generation is now at this retirement kind of transition point and that's been going for a few years now, I think it's just going to add to that stress in our society, right, as more and more people are now retired and relying on the medical system in general. It's to be determined what that's actually going to look like from a cost standpoint. We know, it's probably not going to get any cheaper than it is right now. But it's just another one of those unknowns that we can plan for from a savings aspect. If somebody has not only just the withdrawal, but the resources to be set aside and bucketed for healthcare expenses.

Benjamin Haas 12:41

Yeah, I think that's one of those things where as planners, we think about kind of like pinning different savings towards different goals. You know, retirement accounts, we think that's going towards recreating retirement paychecks. You have education accounts, going towards education. There's just this like, pool of money, that the up for grabs money that we need to be able to earmark towards other things, too. I think that means staying invested outside of those retirement accounts as you can. Having maybe health savings accounts. These buckets of money that are there for uncertainty in your plan. I mean, I know we as planners will talk about that before we say, hey, it's okay to retire, we're going to think about what are the buffers we need to build in there, not knowing what this will need to be earmarked for but with these risks in mind. The easiest thing to do for us in this conversation is say, well, if longevity is there and you can live to 100 - great news, you're going to live a long and healthy life. By the way, it probably means you should be working longer or saving more. It's not fun to say that but it's right. Especially if you are one of those people, that sees an opportunity to live a long and healthy life, right? You manage and live a healthy lifestyle. You have a good quality of life. We need to think about not turning that faucet on of recreating paychecks too soon.

Adam Werner 14:08

What just popped into my head, this is going back a few weeks, maybe a month or so, in France, where they were debating raising the retirement age, essentially for, you know, the government pension in France. There were protests in the streets for wanting to raise that age in the country and I don't remember exactly what it was, but it was like 60 to 63 or 65, somewhere in that range. Not out of the realm of what typically is here in the US either but just the idea of telling a massive amount of people you have to work years longer, is met with resistance. So, to your point, but it's the reality of the situation. If you think back to generations before us, how many years they really have in retirement it per se, like on average? It wasn't 20 to 30 plus years; it was certainly much shorter. So over time, something in that equation is going to need to shift to make sure that you can continue if you're going to live longer that there are the other variables are solved for along the way. Then let's talk through like the savings, inflation and medical expense. Like what are things people could do about that?

Benjamin Haas 15:32

Okay, because I had a thought on that but I think it answers the question that you just posed, we are seeing and I know, we've said this in different spaces, we're seeing more and more people that are willing to earn something in retirement. I think our economy is kind of moving in that direction, where it's not that difficult to get paid for services or to pick up a little side job or, hey, I'm willing to do something that kids these days aren't willing to do.

Adam Werner 15:58

Show up and work.

Benjamin Haas 16:01

Different podcast. But I do think we are seeing more and more people kind of phase into retirement or talk about like, the simplicity of just mowing some grass or not necessarily maybe not being an Uber driver, but assisting in that way. It feels like it's socialization. So I think that whole, get yourself to where you kind of feel financially independent. But if you're willing to still kind of have some sort of income coming in, what is that doing? It's preserving that pool of money. That is your golden goose laying your golden eggs to maybe truly be funding, the latter years of life and not your initial stage of retirement.

Adam Werner 16:42

And that's obviously one lever that someone can control. To a certain extent, obviously, health can be a factor in when someone retires, or how long they can actually work and earn. But delaying retirement, or as you said, transitioning and working part time, for a longer period of time certainly preserves whatever assets you have up until that point. I guess before someone would get to that decision point of, hey, I'm going to stop working, or I'm going to transition. It's reevaluating what you're saving on a regular basis and what is that going to hopefully provide in retirement. What's it actually going to be able to produce? But the other part of that is, how are you invested? I think that trickles over into the inflation side of the conversation. As we said earlier, people are living a lot longer in retirement than we have historically seen and we need to be able to keep up with inflation. So, years and years ago, what may have been, I'm going to use air quotes, relatively easy to earn a rate of return that kept up with inflation. As we live longer, it puts more of the onus on the investor to potentially have to take more investment risks to keep up with inflation over a longer period of time. I think even that aspect of longevity, for certain people who just are very risk averse and just can't stomach the emotional and psychological ride of investing. It's putting more pressure there where it may not have been before, either.

Benjamin Haas 18:26

Well, and that, to me, is the whole psychological part of this is very much well, I guess I don't know this to be true. I'm going to say I assume this to be true. There's this common understanding that the closer you get to retirement, the more conservative you should be, right? This is now a finite pool of money that needs to support me for the rest of my life. I can't put as much of it at risk. When really, I think that may be the exact wrong thing to be thinking. I not only need this money to be here for me at 65 but I need it to be there for me at 100. The only way it's going to be there for me at 100 is if I'm trying to seek that rate of return that's more historically like a 5 or 6% instead of 3 or 4. That's just the numbers game. So, some of that may need to be education on our end to kind of help people understand why. But it also is not just education, it's coaching them through here's why it's important to stay invested and be seeking growth, not just income.

Adam Werner 19:27

And we often talk about in certain situations if people have been good savers, you can, I don't say flip a coin, but it can be the two conversations of you have enough saved so you don't necessarily have to take risk or the other side of that is you have enough saved so you can afford to take risk. A lot of that does again come down to personal preference but the idea being if you're going to potentially be in retirement for more than 30 years. Sorry, I'm going back to like conversations in my head that I feel like we either had on the podcast, or ones we've had with clients that is, as you said, as it's believed that once you get to retirement, I need to reduce my risk. But we've said it before, whenever that time is that you retire, you're not flipping a switch and now taking all of that you say all of what you have saved. And now you know squirreling away, sticking it in the bank account, and now, you're just going to draw it down until the day that you die. It's a very long runway in retirement. Making sure that your money is in spots and this comes back to our three-bucket theory and part of that is just for the mental accounting aspect of it, to make sure you have what you need, where you need it, but are still giving yourself that potential for that long term growth so that you're not at age 90 feeling perfectly fine and healthy thinking, well, crap, I wish I would have done X, Y, and Z, knowing now I'm still alive and healthy well into my 90s.

Benjamin Haas 19:28

Yeah, we could stay there all day.

Adam Werner 20:31

I was going to pivot to the to the medical side. So, we talked about that a little bit, right, that just being an unknown. I think beyond just regular health care expenses, just going to the doctor being on Medicare, how that's going to shift and change over time. Finding the supplemental coverage, you know, the Medigap plans that are out there. That's one side of it. Long Term Care coverage is another just huge unknown, that we've seen, that can completely derail someone's retirement plan later in life.

Benjamin Haas 21:52

Yeah, that's a tough one because now we're getting into, I think it's a tougher topic. Different people have different goals but the reality is, it's a huge expense and I think the stats are somewhere, even within that retirement planning, confident retirement survey. Two out of three people over the age of 65 are going to need some sort of that care, whether that's assisted care, whether that's home health care, all the way up to semi-private rooms. You're talking ranges - $50, $60, $90 grand a year, some of this geographically, depending where you are, the reality is, that's a huge drag on someone's plan and maybe that's not a huge deal, if part of your plan is not to preserve assets for the next generation.

Adam Werner 22:37

Sure.

Benjamin Haas 22:38

But if it is, now we're talking about living to age 100, again, there's multiple factors here that can make this a problem. Am I able to preserve assets? Will they get eaten up by these care costs that, again, are very, very common at the end of life.

Adam Werner 22:57

There are many different ways to go about that. Now, to kind of offset some of that risk. I feel like we've talked about this in other podcasts too. The long-term care insurance landscape has shifted greatly over the last even the last five years but it's still not inexpensive. It's still not as straightforward as it should be. But again, it's insurance so I think part of that is by design. But there are different ways to go about it. So I'll just, I'll leave it at that.

Benjamin Haas 23:34

Yeah, check out the podcast dedicated directly to it. The point is, I will say again, if you are going to really truly plan for longevity for a long and healthy life, to 90, 95, 100, all the more reason before you retire before you stop earning those paychecks, to consider what those options are to transfer that risk elsewhere. I like mental accounting, I'm a big proponent of it. If you've got to work an extra six months to fully pay for that so it's not coming out of your retirement paychecks. Then that's one way to just say I'm going to take what could be a risk - me living long of needing this care - and I'm going to try to eliminate, not eliminate, try to offset some of that by having an insurance paid for. Or seeing what insurance I currently have and can it be shifted to be different and now serve me differently. So there's options, the point is to have the conversations as early as you can.

Adam Werner 24:33

And I think one other, pivoting a little bit. One of the things that becomes even more prevalent as we see people continue to age, is estate planning. Obviously we're proponents that everybody should have their plans documented and I don't know the statistics. I feel like we did one on this not too long ago where we talked about the number of people that actually have a will in the US being less than half. Am I remembering that correctly?

Benjamin Haas 25:03

It's even less than half. I know I misquoted it when we did that podcast to try now. It's not a lot and it's not enough,

Adam Werner 25:13

So not only that, but as people get older, I think it becomes more of a thought that comes to the forefront. I think all we want to highlight here is just obviously the importance of having things documented. It's your will, having somebody named as a power of attorney for your financial accounts, having a living will or an advanced healthcare directive, not only so that you can designate some of those decisions in advance, but also to name someone just like your power of attorney, but for healthcare reasons. That if you can't make those decisions, for whatever reason you have somebody that you trust and believe will make the decisions in your best interest. Having those documented is key step number one, but as you continue to age, making sure those things are still up to date. Just something as simple as if your power of attorney for example, or no, let me step back to the will. Not only do relationships change, people are going to be in your will, that will change as well over a long period of time. So, making sure that you're reviewing something like your estate plan on a regular basis as you continue to get older makes all the sense in the world. We've talked about it before that for younger people just get it done, get something set up and then you can check that box and not have to think about it again for a while. Well, later in life is where that a while kind of drops away and maybe it's something that needs to be reviewed more frequently.

Benjamin Haas 26:55

Yeah. Which makes sense, the more the time goes by the more likely things are to change. So sure, I think you said it well, especially as you age. It's all the more important to make sure it says exactly what you needed to say. And to your point, most importantly, has the right names in there because that might change as time goes by too.

Adam Werner 27:15

So yeah.

Benjamin Haas 27:18

I would say in an effort not to make our 100th podcast last 100 minutes. I think this is a good topic for people that even if you're not in retirement yet, if you are in retirement, any of those, you know, reflect a little bit on how longevity could affect your plan because I think if we went through the exercise of you know, reassessing how everybody's doing, there's always opportunity to shift things around a little bit and pull different levers. It's never too late but the earlier that you can kind of plan for longevity, the better. So hopefully this was helpful.

Adam Werner 27:57

Yep, well said.

Benjamin Haas 28:00

All right. What do you think? Are we going to get another 100 in? Three years from now?

Adam Werner 28:06

I don't know. What would cause us to stop at this point?

Benjamin Haas 28:11

Well then there's your answer. All signs point to yes.

Adam Werner 28:16

We'll keep recording as long as people keep listening and even once they stop, we'll probably still be talking.

Benjamin Haas 28:22

It could be. Alright. Thank you again, for the 100th time for me being able to partner with you.

Adam Werner 28:32

Agreed. Thank you.

Benjamin Haas 28:33

Catch you next time.

Adam Werner 28:35

Bye.

Benjamin Haas 28:52

Hey everyone, Adam and I really appreciate you tuning in. Please note that the opinions we voiced in the show are for general information only and are not intended to provide specific recommendations for any individual. To determine which strategies or investments may be most appropriate for you. Consult with your attorney, your accountant and financial advisor or tax advisor prior to making any decisions or investing. Thanks for listening!

Source: https://www.ebri.org/docs/default-source/rcs/2023-rcs/2023-rcs-short-report.pdf

Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Group are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice.

Ep # 100: What If I Live To Age 100?