How to Stand Out from the Financial Planning Crowd with Accurate Life Expectancy Data

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You use all the tools at your disposal to give your clients an edge in their financial future. While your financial planning software is excellent at making recommendations based on your inputs, it may be missing an important one: an accurate life expectancy projection based on your client’s individual data.

By its nature, wealth management requires several assumptions as you look to the future. Since you cannot accurately plan for a client’s retirement without knowing how long their specific retirement will last, you might base this time span on a general population life expectancy figure. However, planning for an average retirement span of 20 years will not help a client who budgeted for 20 years but ultimately ends up needing to cover 30 years, including additional medical expenses. To ensure that a client doesn’t outlive his nest egg, you could make a conservative assumption that he’ll live to be 100 and map out a plan using this life expectancy. Still, this type of planning does not optimize his investments for earlier use. It also precludes upfront commissions you might be able to earn from shorter term investments that would have been attractive to your client.

Rather than make assumptions, you can use a life expectancy report, or LE report, to give you an individualized micro-longevity risk assessment for each specific client. The ramifications of this refinement are enormous — rather than stretching a client’s finances to meet an typical estimated life span or projecting to age 100 “to be safe”, you can tailor your recommendations so your client maximizes their post-retirement budget during their lifetime.

H2-1 Successful Retirement Planning Depends on Accurate Longevity Forecasting

There are several ways to calculate life expectancy. Organizations like the CDC publish mortality tables online. These tables represent life expectancy for the entire census population based on age, gender, and race, and are an example of “macro-longevity” tables. Their numbers are based on the law of large numbers—and not a specific client (“micro-longevity”).

To determine life expectancy for an individual, you must first assess their individual longeivty risk on a relative basis (i.e., how they compare to a group of like-kind individuals). The concept of life expectancy is more complex than generic tables can portray. While the definition of life expectancy seems self-explanatory to many of us, it takes on an even more nuanced and critical meaning in life expectancy underwriting. Here, underwriters are not providing a general estimation based on an average person with your client’s age, gender, and race. Rather, they are focused on using complex tools to build a life expectancy report for each specific individual.

When you use accurate LE data to help plan for clients nearing retirement, you become a trusted expert because you can do so with a high degree of confidence. You can even offer this service as an added value because it will give clients a clearer picture of their financial future. According to The Motley Fool, most American retirees will outlive their savings by eight to ten years. With proper financial planning, this frightening statistic can be changed. Data-driven decisions can help everyone make changes now to feel more comfortable about their future. With tools like LE reports, you can make more accurate predictions, so you can provide valuable advice on how to build a reliable nest egg, when to draw it down, and by how much.

As Retirement Approaches, a Current LE Report Becomes More Crucial

An accurate longevity risk assessment also benefits your 401(k) management strategies. Since a client seeking to retire from his current job will likely ask to roll over his 401(k) into a traditional IRA, it’s an excellent time to review his retirement goals to make sure that they’re on track. Rather than turning to a simple accurate life expectancy calculator, this is the perfect time to request an LE report.

At ISC, our LE reports are comprehensive and customized. We examine each insured’s unique medical history, including any significant impairments, lifestyle factors like exercise, smoking and alcohol use, social issues like interpersonal engagement, and functional status like the ability to walk or manage finances. Our underwriters assess longevity risk and provide you with more robust reports than are possible from a generic online life expectancy calculator. Armed with detailed information, you and your client can have a much clearer picture of where to shift any investments, when to draw down money, and how much they should receive each year.

You already provide your clients with a wealth of information about their financial investments. Pairing an LE report with their financial reports is one more step that benefits your client tremendously and positions you as a leader in financial planning. By merging this data with financial planning software, you’ll create a clear path for retirement, ensuring that your clients optimize their nest egg and don’t outlive it. You’ll be able to map out a plan that you can all feel good about.