Helping clients overcome their lack of ‘longevity literacy’
Longevity risk continues to be a hot topic for advisors, especially as their clients continue to suffer from a lack of “longevity literacy.“
The TIAA Institute and the Global Financial Literacy Excellence Center at the George Washington University School of Business released data last week showing that American adults are overwhelming unaware of both their potential lifespans and the amount of money needed to cover them.
Respondents were asked to identify the likelihood among 65-year-olds of living to 90 and the likelihood of dying relatively early, in this case, by age 70. Surprisingly, only 12% got both answers correct. Asked how long they think a 65-year-old is likely to live, just 35% correctly said 84 for men and 87 for women.
The reason why such longevity research is so vital to know and understand is because it helps with retirement readiness.
For example, according to the survey, 50% of respondents have already determined how much they need to save for retirement, compared to just 32% of those with weak longevity literacy. Meanwhile, 72% said they are saving for retirement on a regular basis, compared to 58% of those with weak longevity literacy. Finally, 69% of respondents are confident about having enough money to live comfortably throughout their retirement, compared to 53% of those with weak literacy.
David Demming, founder of Demming Financial, said he is always trying to raise the level of his clients’ longevity literacy, no matter their age.
“We just finished a review with a couple aged 84 and 83, respectively. Our topic was longevity risk since he has a fixed pension, which is eroding because of inflation. We discussed the new ‘normal’ inflation rate going forward and the fact that an 80-plus-year-old
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