Estimating a client’s life expectancy is a core part of retirement planning, but the ways in which financial advisors reach that projection can vary significantly from person to person. Some use actuarial tables, others family history. Now, new research suggests another factor to consider: wealth itself.
To measure the impact of income on mortality, researchers at the National Council on Aging and the LeadingAge LTSS Center @UMass Boston analyzed longitudinal data from the Health and Retirement Study (HRS), a nationally representative panel study of middle-aged and older adults.
From 2018 to 2022, older adults in the lowest 20% of earners experienced mortality rates — the percentage of people who died during that period — of 21%, nearly twice as high as those in the top 10% of income, according to the study.
In terms of absolute age differences, older Americans in the lowest income group died an average of nine years earlier — at age 76 — compared to Americans in the highest income group.
Advisors say those findings have significant implications when it comes to making a retirement plan with clients.
Pinning down an impossible number
A client’s estimated life expectancy has nearly endless knock-on effects for retirement planning purposes, advisors say.
“I want clients to understand and feel comfortable with the assumptions we’re using, because these choices meaningfully impact spending, withdrawal rates and investment strategy,” said Carla Adams, founder of Ametrine Wealth in Lake Orion, Michigan.
For advisors working to estimate a client’s life expectancy, considering wealth is crucial.
“Research shows that higher-income individuals not only tend to live longer but also tend to age more slowly — meaning they often experience more healthy years,” Adams said. “That can translate to lower health care or nursing costs in some cases, but it also means they’re more likely to remain active and spend more on travel, hobbies and lifestyle well into their later years.”
But advisors say that wealth is just one of many different factors that can be used when working to pin down a client’s life expectancy.
“A client’s longevity outlook depends on an entire ecosystem of factors: family history, current health, diet and exercise habits, smoking or drinking, stress levels, social connections and even mindset,” said Mitchell Kraus, co-founder of Capital Intelligence Associates in Santa Monica, California.
Yale professor Becca Levy has found in research that older individuals with more positive self-perceptions of aging lived years longer on average compared to those with less positive self-perceptions of aging, even after controlling for factors like age, gender, socioeconomic status, loneliness and functional health.
“So when I talk about longevity with clients, I emphasize not just their net worth but their self-worth — how they live, engage and think about getting older,” Kraus said. “Fact-finding helps us set realistic guardrails. Wealthier clients often have access to better medical care, safer living conditions, healthier food and more flexibility for exercise or stress management — all of which support longevity. But I also remind clients that money alone doesn’t guarantee health or happiness.”
Still, no matter how many factors advisors take into account, the possibility that their exact estimate misses the mark is a near guarantee, according to Alexandra Rooney, a private client advisor at Main Street Research in New York City.
“As I tell clients, this is going to be wrong, and all of my data points should lean conservative. We can always refine it and talk through spending more down the road if, in reality, they have more assets than predicted; it’s much harder to think they’ll be set for life and realize that’s not true, and we have a shortfall in their 90s.”
As a general rule, advisors err on the conservative side of their life expectancy estimates to try to protect against the possibility of running out of money in retirement. Others don’t try to estimate it in the first place.
Retirement planning with a boilerplate figure
While some advisors consider a wide range of factors when estimating a client’s life expectancy, others skip the process altogether.
Lauren Lindsay, a Houston-based financial advisor at Paragon Private Wealth Management, said that she runs all of her retirement plans to 100, no matter the client.
“I have had people say things like, ‘No man in my family has lived past 85,’ but it is too hard to predict,” she said. “Both of my grandmothers lived to 99, and my oldest client passed away at 106. If the plan works until 100, I feel pretty good about things.”
Benjamin Bolen, a financial advisor at University Investment Services in Ann Arbor, Michigan, takes a similar approach. Bolen said he uses age 90 as a default life expectancy figure, unless a client has a significant reason to believe their number would be lower or higher.
For clients who intend to fully deplete their savings before death, the prospect of overestimating their life expectancy — and unintentionally leaving money in the bank — is not especially appealing. But for many married couples sharing a retirement plan, advisors like Kyle Newell, owner of Newell Wealth Management in Winter Garden, Florida, say it’s generally safe to assume that at least one spouse will live into their 90s.
Plus, whether clients like it or not, the greater risk in retirement is running out of money — not failing to spend it all, Newell said.
“I explain the reality of undershooting life expectancy. Yes, it would be unfortunate for many to have lots of money left over upon passing. … Clients often quip that they want to bounce the last check,” Newell said. “In reality, the real risk seems to be assuming a shorter lifespan, spending too much, then not having enough for some of the most expensive years of one’s life. Almost no one wants to be a burden on their family through the aging process.”
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