8 Reasons Retirement Has Gotten Harder for the Affluent: Michael Finke

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Underestimating life expectancy is a problem for all older Americans, warns retirement researcher Michael Finke, but it is especially problematic for high-income earners.

This may seem counterintuitive, says the professor and Frank M. Engle Chair of Economic Security at the American College of Financial Services, given the fact that higher earnings are linked to higher levels of education, but the fact is that higher-earning Americans have made surprisingly significant gains in longevity after the age of 65.

“A longer retirement is a more expensive retirement,” Finke writes in a new analysis published by the American College. “As a result, financial planners need to understand how long their clients are likely to live and develop strategies for funding longer lifestyles.”

As Finke explores, most people have only a vague idea of how long they are likely to live in retirement, and it’s common for people to think of the age their parents or grandparents died when estimating their our own longevity.

“In reality, longevity after the age of 65 increased by about a year every decade in the 20th century, and higher-income Americans can expect to spend significantly more years in retirement,” he writes.

Finke’s analysis argues that advisors need to help clients establish a more appropriate planning horizon and make better choices through longevity education. This is especially importance since survey data suggest that individuals who are less longevity-literate are more likely to claim Social Security early, he adds, and less likely to plan for income into their 90s.

See the slide show for a list of highlights from Finke’s latest look at longevity and the challenges of longer — and more expensive — retirements.

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