Why does this financial advisor plan for all his clients to live to be 100?

When she died in Omaha, Neb., in January at age 115, Thelma Sutcliffe, born in 1906, was the oldest living American woman.

Although her story is unusual, it is no longer unusual. The number of people living over 100 is increasing every year. As of 2016, the most recent year for which data is available, there were 82,000 centenarians in the U.S., and that number is expected to rise to 589,000 by 2060. I currently work with a 102-year-old woman who is sharp and shows no signs of slowing down — and I I don’t consider it foreign.

As a financial planner, the question I hear most often is, “How much money do I need for retirement?” It’s hard to answer because I can’t go on with, “How long will you live?” Instead, I look at averages and use optimistic projections. When the Social Security Act was signed in 1935 and the full retirement age was set at 65, the average life expectancy was just under 62. When I began my career as an advisor in the 1980s, financial planning did not extend to clients in their mid-80s. But life expectancy increased year by year. Today (taking into account the drop in Covid deaths) it is 77, with many more people living into their 90s and beyond.

Actuarial tables calculate averages, but there is no such thing as an average life expectancy, so we have always predicted a longer life expectancy than the statistics would dictate. For a long time we used an age of 95, but about three years ago, taking into account advances in health care and healthier lifestyles, we began projecting a life expectancy of 100 years for both members of a married couple. We do not realistically expect most of our clients to reach their centennial birthday, but the chances of that happening are greater than at any time in history.

I’d like to say that I’ve been prudent in planning for my clients as if they were going to live to be 100, but I’m not alone. The IRS also took longer retirements into account in its changes to the required minimum distribution, or RMD, regulations. The new IRS life expectancy tables that calculate annual RMDs have reduced the required annual distribution as well as raised the RMD start age to 72 from 70 ½.

When I sit down with a client, my goal is to create a financial road map that will allow them to maintain the lifestyle they choose for as long as they live – and hopefully leave a legacy. In the financial planning process, we take into account the individual’s goals, as well as the effects of inflation and potential health care costs. The biggest fear of most retirees is that they will outlive their money and that is the last thing we would ever want to see happen to anyone, especially one of our clients.

That’s why I wouldn’t be surprised if in a few years we move our goal to 105 or even 110 years. Only time will tell.

Photo illustration by Barron’s Advisor; Photo by Andrew Wilkinson

Ken Van Leeuwen is the Managing Director of Van Leeuwen & Company, a financial planning firm based in Princeton, New Jersey that he founded in 1997 after 18 years working for several financial institutions. As founder and financial advisor, he is responsible for the overall strategic direction of the firm and also serves clients, which include corporate executives and non-profit organizations.

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