As the U.S. Census Bureau projects that the number of Americans reaching the age of 100 is set to quadruple by 2054, new research reveals a concerning gap in financial planning amidst this surge in longevity. According to a recent study conducted by the Nationwide Retirement Institute and The American College of Financial Services, millions of Americans are at risk of outliving their savings as lifespans extend into the 90s and beyond.
The research is part of the Nationwide Retirement Institute’s Century Club campaign, which focuses on the financial implications and consumer perceptions of increased life expectancy. It highlights a stark reality: extending retirement from 30 to 35 years can increase the risk of depleting savings by an alarming 41%, a trend that worsens with longer lifespans, especially among healthy, higher-income retirees.
A companion consumer survey indicates that many Americans are misjudging their likelihood of reaching 100 years old, as well as the financial strain that this level of longevity entails. Only 29% of respondents expressed a desire to live that long, often citing fears of declining health and financial instability. Alarmingly, about three in four participants worried they would run out of money before their time is up.
The current economic landscape exacerbates these concerns. The joint research found that 40% of non-retired Americans plan to delay retirement due to inflation. When considering lower projected returns on investment portfolios, extending retirement by just five years could increase the risk of financial depletion by over 300%.
Experts stress that a shift in retirement planning is imperative. Consumers and financial advisors need to prioritize longevity risk and consider strategies that guarantee income, protecting against volatility. Michael Finke, PhD, CFP®, and professor at The American College, warns that underestimating one’s lifespan can significantly jeopardize financial security.
“You cannot plan effectively for retirement without understanding how long you might live,” said Dr. Finke. “Those who actively plan for longevity tend to feel more secure in their financial futures.”
The research from the Nationwide Retirement Institute also offers a hopeful note. If Americans were more aware of their potential for a longer life, they indicated they would take significant steps to enhance their health and financial wellbeing. Key findings include:
- 58% would adopt a healthier lifestyle
- 67% would be more attentive to their finances and increase savings
- 37% would consider delaying their retirement
- 63% would take on less debt
Moreover, adopting a positive mindset can contribute significantly to financial security, as research shows optimists are 75% more likely to save at least 10% of their income.
As Americans grapple with the reality of longer lives, the need for education on retirement planning is clear. While 70% of respondents believe society is unprepared for the needs of an aging population, effective solutions exist. Long-term care insurance and guaranteed income products, such as annuities, could provide essential support, but they remain underused and misunderstood. Only 1 in 10 Americans reports owning a long-term care insurance policy, despite 32% acknowledging its importance for preparing to live to 100 years.
Recognizing the intertwined nature of physical health, mental wellness, and financial security, leaders in the financial services sector emphasize the need to foster better planning and awareness. “To thrive well into our later years, we must nurture strong financial habits alongside our health,” stated Kristi Martin Rodriguez, leader of financial services marketing at Nationwide.
As the life expectancy continues to rise, a proactive approach to financial planning is more crucial than ever to ensure a secure and fulfilling retirement for future generations.
