Longevity Upends Traditional Financial Planning: MIT AgeLab Study

Brian J. O'Connor

Sat, Jan 4, 2025, 11:30 AM 6 min read

Retired couple enjoying time together outdoors.

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The fact that Americans are living longer has made the usual approach to financial planning incomplete, according to a new study of approximately 1,200 people and 10 focus groups by MIT AgeLab and Transamerica. The traditional three-part plan of education, work and retirement and aiming to ensure that people have enough to live comfortably in retirement, fails to take into account the growing longevity of Americans, it concludes. Instead, the researchers behind the report advocate focusing on three factors: well-being, work and finances as the three major phases of adulthood.

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The Growth in Longevity

Americans are living much longer than their grandparents and great-grandparents, with the average life expectancy growing from 68 years in 1950 to nearly 79 years by 2009. With these longer lifespans come longer retirements. While a man retiring in 1970 lived less than 13 years in retirement, the average length of retirement for men in 2020 was nearly 19 years. Someone who’s 65 in 2023 has about a 50% likelihood of living two more decades.

This trend is expected to continue. While there were approximately 92,000 octogenarians in America as of 2020, that figure is expected to nearly triple in less than 25 years, for an estimated total of 270,000 Americans older than 100 by 2045. In other words, if they stop working at age 67, they could spend as much as 33 years in retirement.

To get a feeling for just how long 33 years can be, consider that in 1990 George H. W. Bush was president, Madonna was at the top of the music charts and the No. 1 TV show was “Cheers.”

“While Americans are generally optimistic about their future, they may not fully appreciate how much their financial needs, priorities, and life circumstances will change over time,” said Dr. Joseph Coughlin, director of MIT AgeLab. “More than ever, planning for longevity means understanding what matters most at each stage of adulthood, finding balance, and supporting priorities with the behaviors and actions that lead to a better future.”

How Longevity Affects Financial Planning

Phil Eckman, president of Workplace Solutions at Transamerica, said that “the way we approach our lives and the way we work is changing. People want flexibility and choice in all parts of their life, both at work and home.”

Traditional financial planning was built around what, by today’s standards, was a comparatively short retirement. That meant leisure was the focus, building a nest egg adequate to fund what now looks like a comparatively short retirement. But now that the length of retirement has grown substantially, this phase of life is dynamic rather than solely centered around leisure.

For Americans in Their 60s and 70s

“Older adulthood is when clients may begin to celebrate the goals they were saving toward, such as dream vacations or having more time to spend with family, but still a time when many should be prepared to live for several more decades,” the report concluded.

That means retirees can use financial advisors as coaches to understand the complexity of this phase of life. They may also be able to help them understand the various ways they can “prioritize social, emotional and physical well-being relative to financial or work-related goals in the upcoming 10 years of their lives,” according to the report.

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For Americans in Their 40s and 50s

Man in his early 50s thinking about retirement

Midlife adults face complex and emotional challenges, from striving to advance in their careers to caring for children and parents. With such an array of challenges, it’s not surprising that this cohort reported the lowest exercise rates and said they ate healthy less often than any other age group. One implication is that people in this group should work with their financial advisors to arrange priorities to ensure that they are taking care of themselves, both financially and in other ways.

“Financial professionals can serve as agenda setters for clients in midlife, helping them to anticipate
future needs, challenges, and celebrations,” the report stated. “For example, financial professionals can both support clients who are in a present-day caregiving role, while helping them anticipate a time in later life when they may require care themselves.”

For Americans in Their 20s and 30s

The study also found that this cohort tends to be motivated to invest in their well-being, establish themselves in their careers in the short- and long-term and begin saving for key financial milestones.

Younger adults can benefit by using the advice of financial advisors to adopt new habits, routines and attitudes that will prepare them both for the near and distant future. They also should work with financial advisors to create an adequate emergency fund and build their net worth.

Bottom Line

Young woman talking with her financial advisor.

Retirement isn’t just about money. Longer lifespans mean that retirement will be far more dynamic than the leisure focus our parents and grandparents had. Increasingly, it’s more about overall well-being. That’s something that includes having an adequate nest egg, but it’s increasingly about relationships, personal goals, health and avocational opportunities. The report finds that getting financial advice in each phase of adulthood is key to having a retirement characterized by well-being.

Tips on Retirement

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