People are living longer, and it has created rising concern among retirees and their financial advisors about whether they will have enough to live on in retirement. Several firms have acknowledged this longevity risk and are urging advisors to speak to their clients and promoting certain financial products that can help.

According to Milwaukee-based Northwestern Mutual, there is a 50% chance that a 65-year-old man will live beyond age 86. Given that increased life expectancy, retirement savings have to last longer than it used to. Complicating matters is rising inflation which increased costs beyond what many budgeted for.

“You have a whole bunch of people who are living a heck of a lot longer who need to spend more money as they get older because of healthcare or other expenses they’re incurring and that puts a strain on all the systems,” said Kelly LaVigne, vice president of Consumer Insights at Minneapolis, Minn.-based Allianz Life Insurance Company of North America.

Investors are experiencing that fear as a 2022 Allianz Risk Readiness Study found that 63% of non-retirees surveyed fear running out of money more than death. That is usually when they turn to a financial advisor who can help them plan for retirement so they will not worry about running out of money. The Allianz survey found that 44% of respondents said having enough money to last throughout their retirement was one of the most important things a financial professional can help them with.

Financial firms understand the value of advisors and have stepped up their efforts to support them as they guide clients through retirement.

“Customers will choose the financial advisor to be the most important person in their financial life helping them sort through those decisions,” said Dylan Tyson, president of Prudential Retirement Strategies at Newark, N.J.-based Prudential. “Financial advisors can really help achieve a customer’s stated goals by providing them with protected lifetime income as a core of their portfolio.”

Advisors need to sit down with their clients and create a long-term retirement plan, according to LaVigne. It should be a written plan that the client commits to and that lists their expenses, from the mandatory ones such as bills and mortgage, to fun and discretionary things. The advisor should also incorporate any contingencies that could come up as best as possible, LaVigne said.

“When clients work with an advisor to build plans with strategies for accumulating and eventually spending down wealth and savings, as well as risk protection, they are better positioned to retire comfortably and not worry about outliving their money, their savings not keeping pace with inflation, or spending all of their retirement assets on long-term care needs,” said Kamilah Williams-Kemp vice president of Risk Products at Northwestern Mutual, in a statement.

When establishing a retirement plan, the advisor and client should build one that will last about 30 years, according to Rona Guymon, senior vice president of Annuity Distribution at Nationwide, which is based in Columbus, Ohio.

“The important first step is to have a financial plan that addresses your decumulation phase with at least a 30-year time horizon in retirement,” she said, in a statement. “Something that takes into consideration your essential income needs and your guaranteed source of retirement income to cover those essential expenses.”

Longevity risk must always be on the back of an advisor’s mind when making financial decisions with their client, according to Tyson.

“The reason this is important is because in an otherwise well-constructed financial plan if you don’t properly consider longevity risk, that really is the ticking time bomb in a financial plan as a whole,” he said.

Firms are helping advisors spread that message to clients through webinars and tools. Nationwide provides its advisors with professional webinars that focus on financial planning topics including Social Security and Medicare planning as well as tax efficient retirement income, according to Guymon.

Jackson National Life Distributors, which is based in Lansing, Mich., developed the Retirement Expense and Income Calculator. It projects retirement expenses to understand if an annuity may be beneficial in helping to close any coverage gaps.

Firms are also highlighting their annuity products as an alternative to Social Security. Many rely on Social Security in retirement because it provides guaranteed income that increases over time and has a tax advantage, said LaVigne.  However, a majority lack the confidence to rely on it for the long-term and firms are touting annuities as an alternative to advisors.

“To combat the financial risk of longevity, Jackson partners with financial professionals to help them and their clients understand the role annuities can play as part of a prudent, diversified retirement plan,” said Scott Romine, president of Jackson National Life Distributors, in a statement. “Annuities provide a source of lifetime income that is sheltered from market and longevity risk, meaning the amount of income stays consistent for a lifetime.”

Similarly, Nationwide touts its annuities as an alternative option to provide that guaranteed income that investors need in their retirement. Northwestern highlights its Long-Term Advantage product, which launched last September and covers long-term health costs, according to Williams-Kemp.

It is important for families to be involved in retirement planning because it impacts everyone in terms of the amount of money coming in and the amount being spent, LaVigne said.

“Longevity is one of the things that doesn’t affect both people in the couple normally at the same way [because] there’s always going to be a survivor and there will be someone who will be left behind,” he said.

In most instances the woman is the one who outlives the husband, and she will have to go on without their partner. It could be for a significant time. A study by the Society of Actuaries found that 6% of people who outlive their spouse live until 90 and 40% until 95.

“The survivor, while they might have been comfortable on what they were receiving before, they lose some of their Social Security, which was guaranteed increasing income and they have to replace that,” LaVigne said.

It is important that advisors stay connected with their clients to be sure they remain in tune with what their concerns are, said LaVigne, even if those clients do not properly articulate them.

“Use the people that have their thumbs on the pulse of the general public to find out where their greatest fears are,” he said. “Keep abreast of what your clients are feeling even if these clients aren’t saying it explicitly.”

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