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There’s a chance your clients will outlive their plans

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If your client turns 65 this year, the census bureau says she’ll probably live until she’s at least 87. Sounds like a long time, right? Yet longevity experts say that’s an underestimation. What’s more, clients will spend more years in better health than their parents. Traditional retirement planning is due for some major changes.

“The most important planning advice I can give my clients is that they should work longer than they thought they would,” says Steven Podnos, a CFP and MD, in this month’s feature story
on longevity.

How long is long? There’s no reason to stop before their 70s, Podnos asserts.

Senior editor Charles Paikert, who delved deeply into the latest medical research, statistics and planning strategies, tells me he was surprised that 100 has become the default life-expectancy number for many advisors.

“Medical breakthroughs really are pushing the limits of not just life span, but longevity with reasonably good health,” Paikert says.

And while many advisors have factored longer life spans into their clients’ retirement plans, they are neglecting other, vital facets. “Planners know about budgeting, income streams, etc.,” Paikert says. “But they also need to know about workplace and volunteer opportunities and living/lifestyle options.”

There’s been another great shift in the world of planning: After years of contentious discussions, the Department of Labor in April unveiled new fiduciary rules for retirement advice. This is “a milestone in the history of the industry,” writes columnist Bob Veres.

Some, however, say the rule doesn’t go far enough. Columnist and advisor Kimberly Foss writes that she is pleased that the rules will distinguish independent firms from wirehouses. But she and others object to the DoL’s accommodation that allows fiduciary and fee disclosures to be posted on a brokerage firm’s website, rather than handed to investors. “This seems to open the door to a host of potential problems,” Foss writes.

Still, many independent advisors are pleased the rule will allow them to distinguish themselves when clients ask probing questions about retirement plan choices, and how their planners are compensated.

How will the fiduciary rule stand the test of time? Now that we may live longer than we ever anticipated, we could have many more years ahead of us to figure it out — and possibly await additional fiduciary requirements.

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