Planning for a Long Retirement: A Q&A With Steve Vernon

When you picture your retirement, what does it look like? If you’re like many, you’re probably focused on the many joys associated with not working. Perhaps you’re imagining spending extra time with your kids and grandkids, thinking about how you can take your boat out more often or dreaming of traveling the world with all your newfound freedom. Whatever your big retirement goals are, having a plan in place to achieve them is essential to your fulfillment in retirement. 

But that means it’s equally important to plan for the parts of your retirement that won’t feel like your hard-earned, well-deserved vacation. Think of events like stock market crashes and periods of high inflation, as well as other challenges like rising health care costs and the effects of aging. While even one of these risks may have the potential to disrupt your big plans, consider that today’s retirees are likely to face all these challenges at some point. That’s because, thanks to greatly increased longevity when compared to prior generations, today’s retirees can reasonably expect retirement to last 20 to 30 years.  

According to renowned retirement and longevity expert Steve Vernon, this is a huge opportunity area for today’s pre-retirees and retirees. A lot can and will change in such a long time, but when you plan for both the ups and downs of retirement, you are more likely to be positioned to live well in retirement—and you’ll sleep better at night when there’s turmoil in financial markets. 

Simply put, folks aren’t spending enough time planning for these events. In this interview, Steve shares his insight based on decades of experience working in the retirement industry and studying the impact of longevity on retirement. 

Steve, you’ve had a long and fascinating career working in the retirement field. What is your professional background, and how did you end up where you are today? 

I worked as a consulting actuary for more than 30 years, helping large corporations design and manage their retirement plans. During the 1990s and early 2000s, I was on the front line of employers switching their primary retirement plans from traditional pension plans to 401(k) plans.  

I understood the reasons employers wanted to make this shift—they didn’t want to assume the investment and longevity risk of the promises they were making to their employees to pay monthly pensions for the rest of their lives. So they shifted this risk to employees and retirees! The trouble is that managing these risks is well beyond the skills and experience of most people.  

I didn’t think this would go well for millions of older workers, and there’s substantial evidence to support my fears. As a result, I “retired” in 2006 as a vice president of Watson Wyatt Worldwide and embarked on an encore career to help ordinary workers retire in a 401(k) environment. I founded my company, Rest-of-Life Communications, to research and educate pre-retirees and retirees about the various decisions they need to make as they transition into their retirement years. “Rest-of-life” is my word for “retirement,” to emphasize that you’re planning for more than just “not working.”  

I also spent nine years as a consulting research scholar at the Stanford Center on Longevity, researching strategies to generate retirement income from 401(k) and IRA accounts. Along the way, I also studied how people make retirement decisions and hung out with other researchers who specialize in health, fitness and longevity. 

I translated this complex research into four books on retirement planning, and over the years I’ve published more than 1,000 online columns on retirement issues for CBS MoneyWatch and Forbes.com. In other words, I’ve thought a lot about retirement! 

Based on your extensive experience in this space, what do you believe is the biggest misconception among Americans when planning for their own retirements? 

The biggest mistake I see is that most people don’t spend enough time planning for the rest of their lives. They somehow think that things will turn out OK. If they have thought about a possible risk that could disrupt their lives, their risk management strategy is often “I’ll deal with that when it happens.” 

Getting more specific, many people make the mistake of focusing only on the joys of not working and planning only for the vacation part of retirement—travel, hobbies, etc. In reality, they are entering a new phase of their lives that could last 20 to 30 years. It’s not merely the final chapter; it’s a whole new book! A lot can and will happen during such a long time. Most likely they will have better outcomes if they plan for the inevitable ups and downs in their lives during a long retirement.  

If I Google “average American life expectancy,” I’ll get data from the CDC suggesting I’d live until my 70s. But you say folks should expect to live much longer than that. Why is this not the data people want to rely on when thinking about their own life expectancies and building their plans for retirement? 

Most of the life expectancies you read in the media are life expectancies at birth. Often these measures look at the entire population, and they might not distinguish by gender. Such life expectancies are really a measure of well-being in a broad population, and they aren’t very useful for planning your retirement. 

When planning retirement, pre-retirees and retirees should focus on their remaining life expectancy, considering their current age. If you’ve survived to your 60s and 70s, you’re in a more exclusive longevity group compared to the population at large.  

What I recommend is obtaining a personalized longevity estimate that uses your gender and reflects your life circumstances, including your family history and basic health choices. 

How would someone go about obtaining a personalized longevity estimate? 

I suggest spending some time estimating your life expectancy with a few different online calculators. It can be very sobering to see how long your financial resources may need to last. Additionally, you can see that you will have a whole new phase in your life that could last a long time. What will you do with this extra time in your life? 

The results from various life expectancy estimators can be different. Life expectancy calculations are an inexact science, as there are many influences on your lifespan, and there is a great deal of uncertainty about how long an individual might live. The more questions that a specific calculator asks, the more personalized your life expectancy estimate will be.  

Here are some great resources: 

• Northwestern Mutual – Let’s start with Northwestern Mutual’s life expectancy calculator. This easy-to-use calculator asks 13 questions about your lifestyle and family history. That calculator estimated that I might live to age 100! 

• Living to 100 – This is another popular life expectancy calculator developed by Dr. Thomas Perls, a respected physician who authored the popular book Living to 100. The calculator is highly personalized, asking dozens of questions about your health, nutrition, lifestyle and family history. That calculator estimated that I might live to age 101! 

So far, the results look pretty good for me! These results convince me I should plan to be financially secure no matter how long I live. 

However, I’m sobered by the fact that none of my male ancestors lived until age 90. To help temper my optimism, I used the Actuaries Longevity Illustrator, developed by the American Academy of Actuaries and Society of Actuaries. It’s the least personalized of the calculators, asking only questions about your overall health status and whether you smoke. It shows the odds of living to various ages; and if you’re married or have a life partner, it illustrates how long one of you might live. This is helpful for retirees who want to plan for the financial security of their spouse or partner after they’re gone. (This calculator shows that there’s less than a 50/50 chance I will make it until age 90 and only a 7 percent chance I’ll live to age 100.)  

These various results show the uncertainty surrounding how long you could live. There are also many factors that can influence your estimated lifespan. You’ll learn a lot by seeing the factors that the various calculators consider when estimating your lifespan and the corresponding impact each may have. 

Speaking of the factors that influence your lifespan, what could people do to help improve their odds of living well into their 90s? Is it just focusing on eating well and staying fit, or are there other less obvious things they should be doing? 

Yes, eating well and staying fit help improve the odds of living a long life. And to state the obvious, you don’t want to smoke or abuse alcohol or substances. However, there are other factors within your control. You’ll want to keep your weight at healthy levels, get regular checkups, get sufficient sleep most nights, enjoy a rich social life and seek ways to manage the inevitable stresses in your life. This means taking steps to be financially secure, since money worries can be a top source of stress for retirees. Your financial advisor is well positioned to help you in this area. 

I also suggest enlisting a health professional who can work with you to improve your health and expected lifespan. For example, you can ask this individual to prescribe regular diagnostic tests, customized to your circumstances, that can serve as early warning signs of serious diseases. These tests can alert you to possible lifestyle changes or medical interventions that might be needed. 

Living longer and having a prolonged retirement sounds like an opportunity to pursue many of life’s goals. What positive impacts do you believe longevity has had on the modern retirement? And, conversely, what are the negative impacts of living longer? 

Today, many people will live 20 to 30 years in retirement compared to 10 years or less for previous generations. For these prior generations, retirement meant a few years of dignity before they died. Before them, most of humanity worked in some way until they died. There was no such thing as “retirement” for most people. 

Now retirement can be another phase in life, a chance to do anything you didn’t have time to do while you were working full time. Go ahead, make a bucket list! Think about relatives and friends you might want to reconnect with. Are there any regrets that you can address?  

Here’s an insightful story. My wife and I were recently traveling in Mexico, and we saw a van owned by a retired couple who were traveling through Central and South America. The van had a bumper sticker on it: “Die with memories, not dreams.” 

On the other hand, there can be negative impacts of living longer. First, a lot can go wrong in another 20 to 30 years of life that you have no control over. You’ll most likely experience a few more stock market crashes, periods of high inflation and other disruptions in the economy that you’ll need to survive.  

A serious implication of longer lives is that many people will become quite frail in their later years, and they might experience diminished capacity for managing their money and assets. This can lead to significant financial losses due to making mistakes, fraud or exploitation. 

Many retirees may have seen their parents go through such periods of frailty, and it was a wake-up call that they’d need to address these risks for their own lives. These risks deserve your time and attention to design and implement strategies for that period of your life. 

When it comes to a financial plan for retirement, it’s important to be well positioned to both pursue the types of life goals increased longevity affords and handle the curveballs you talked about. To do that, how long should a financial plan be designed to last? 

Your financial plan should be designed to last the rest of your life, no matter how long you live—and your spouse or partner, if applicable. It should also be designed to survive stock market crashes and periods of high inflation since they are inevitable during a long retirement. There are strategies to address these risks—it’s your job to learn your options and choose strategies that best meet your circumstances. Your financial advisor is a great resource to help you address these risks. 

What’s the key takeaway we should all keep in mind when planning for a long retirement? 

Plan for the rest of your life, considering all aspects of your life. Think beyond the initial period of freedom right after you retire. Think beyond the “vacation” aspects of retirement. 

And remember that your health, vitality and family will inevitably change as you age into your later years. 

Steve Vernon is not affiliated with Northwestern Mutual, and the views expressed by Steve Vernon do not necessarily represent those of Northwestern Mutual or its subsidiaries.   

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