Should retirees still plan for 95?

Financial planners use age 95 as the default life expectancy, but a new report casts new light on that assumption.

  • By Kate Stalter,
  • U.S. News & World Report
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Financial planners often use the age of 95 as their default for life expectancy.

However, a recent white paper by HealthView Services, a maker of health care cost-projection software, questions that practice.

"Planning to age 95 has become a little-questioned industry rule of thumb," the white paper states. "But the vast majority of Americans will not live to age 95, even if they are in good health."

According to data in the white paper, 95% of retirees in their 60s or older have at least one chronic condition that will reduce their projected life expectancy.

Consider these factors when planning your retirement budget to determine what life expectancy target best suits your goals.

Why 95 remains the standard for financial planners

One of retirees' most common fears is outliving their money. This is a legitimate concern, as life expectancy has increased in recent decades and many people lack an understanding of how long their money will last.

"I almost always assume clients live until age 95 when I do my financial plans," said Carla Adams, a certified financial planner and founder of Ametrine Wealth in Lake Orion, Michigan, in an email.

Because people frequently outlive their actuarial life expectancies, Adams and other planners take a conservative approach. "If clients have a family history of longevity, then I will assume an even longer life expectancy," Adams said.

"In terms of risk, which is the bigger mistake: Assuming that a client will live too long and making potentially unnecessary changes to their financial plan such as recommending they cut their spending, or assuming too short of a life expectancy and risking them outliving their assets?" she asked.

"It's certainly important to find a balance, but I do like to err on the side of caution," Adams said.

The benefit of overfunding

Many advisors advocate for more caution because their clients often live longer than actuarial tables indicate.

"While some clients may not live to 95, I find that using 95 as the life expectancy assumption can protect a client from expense fluctuations as they age," said Lauren Lippert, a certified financial planner and managing director at MAI Capital Management in Cleveland, in an email.

The benefit of overfunding due to passing before life expectancy outweighs the risk of underfunding, she added.

"If a client lives beyond that lowered expected age, their medical or living expenses may exceed the assumptions in the expense scenario, creating financial issues late in life," Lippert said.

Current life expectancy projections fall short of 95

According to HealthView, a 65-year-old assigned female at birth has a projected life expectancy of 90 while a 65-year-old assigned male at birth has a life expectancy of 88.

Some advisors believe that planning for clients to live to 95 is excessively cautious, acknowledging that not everyone will live that long.

"I have been a financial advisor for 20 years, and in that time, I have only had one client live into their 90s," said Adam Puff, president and founder of Haddonfield Financial Planning in Haddonfield, New Jersey, in an email.

Although Puff said his client "is still alive and sharp as a tack at 94," he believes planning for a life expectancy of 95 is too high.

"I am only using my practice as an example, but 20 years of plans, with only one person making it into their 90s, would certainly lend itself to saying that 95 is likely too long for the vast majority of people," he said.

Consider increases in longevity

According to a January 2024 article by the Pew Research Foundation, the number of Americans age 100 and older is projected to more than quadruple over the next 30 years, from an estimated 101,000 in 2024 to about 422,000 in 2054.

"In the last three decades alone, the U.S. centenarian population has nearly tripled," according to Pew.

As with most aspects of financial planning, the decision to run projections for a longer life span depends on several factors.

"I would only do this in a scenario that clearly called for it," Puff said.

For example, he said, an individual with a very healthy, active lifestyle and longevity in his or her family may have a greater chance of living to 100.

"This is a situation where a financial advisor should run multiple plans to varying ages to provide the client with a full picture of every possibility that could arise. You may have plenty of money until you are 90, but after that, it could get tight," he said.

Puff added that he believes most planning software has weaknesses when it comes to accurately projecting expenses as clients age.

"There is usually a point in your life where you are reasonably healthy, but you’ve aged. You don't travel as much, you stay home more and your family comes to you," he said.

"For many people, this stage can last a few years. In that time, you generally spend far less money than you previously spent. Planning software really just increases your living expenses until you die," Puff said, adding that this phase is more common than software can capture.

"I believe there is this wrinkle for almost everyone: You are without any major medical issues, life is pretty good, but your lifestyle changes and your expenses go down for a period of time. That lull can add years to any retirement plan."

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