Planning Properly for the "New Longevity".

• Position: Longer life expectancy - Brief Article

Americans who were born at the end of the 20th century are likely to live at least 30 years longer than those born at its start. This has resulted in people living longer in retirement than they or their financial advisors may be planning properly for.

What is changing so rapidly--more so than many people realize--is what Michael K. Stein, author of The Prosperous Retirement, calls the "new longevity." Longevity is the expected remaining life span of someone who reaches a particular age, such as 65. Not only has longevity been increasing for those who reach age 65, it is accelerating more rapidly.

According to Stein, the rate of change in the longevity of older Americans (65 or older) increased a modest .01% a year in the early decades of the 20th century. That rate of change jumped tenfold by the end of the century, to one percent a year. He believes that, "in the first decades of the 21st century, the rate of change is likely to approach 1.5% a year."

What are the consequences of this acceleration for retirement planning? Stein gives the example of people who plan to retire in 2010 with what at that time might be a 20-year life expectancy. They may have invested during their working years and budgeted withdrawals in their retirement years based on that 20-year expectancy. If Stein's estimate proves accurate, though, that longevity would increase 1.5% a year over those 20 years. Thus, they would live 26 years, not 20. If they and their advisors had...