Episode summary
Why Longevity Protection Belongs in Every Retirement Income Plan
Summary
Longevity risk is framed as a central retirement-planning problem because clients may need income for 30 years or longer, and Dan Gutman argues that accumulation alone does not solve it. He says inflation, market risk, sequence risk and longevity can all compound one another, while only about 2% of the roughly $34 trillion in retail nest egg assets has any protection to ensure income lasts as long as the client does. He also notes that people in the top two income deciles may live three to five years longer than average, raising the odds that a 65-year-old couple could reach 95 or older.
Gutman argues that high-net-worth retirees can be especially vulnerable because they often have higher spending, lower reliance on guaranteed income sources, and therefore hesitate to spend in retirement. Protected lifetime income, he says, can provide a “license to spend” and help clients enjoy assets they spent decades building.
He says advisers should address decumulation from day one, not only when clients retire. That planning should include spending, legacy goals, and charitable intentions, and should be personalized to each household. He highlights insurance-based solutions such as fixed index annuities, registered index linked annuities, buffered annuities, and newer insurance overlays like Credential Active Income, which he says can provide protected income while clients keep assets in their chosen custodian.
Key takeaways
- Dan Gutman says longevity is the retirement risk that magnifies all others and cannot be diversified away.
- He says only about 2% of the $34 trillion in retail nest egg assets has protection to ensure income lasts as long as the client does.
- Gutman argues affluent retirees may be even more exposed because they face higher expenses and lower income stability.
- He says protected lifetime income can give clients a “license to spend” instead of underspending out of fear.
- Gutman says advisers should build decumulation planning into the relationship from day one, not only near retirement.
Notable quotes
“longevity is the risk that magnifies all others, and it's one that you can't diversify away”
“There's over $34 trillion of retail nest egg assets saved up today, but only about 2% of those assets has any form of protection”
“What protected lifetime income does is it provides a license to spend”
“advisers should be incorporating this in day one of a client relationship”
“they can deliver protected lifetime income to their clients, but they don't need to transfer assets to an insurance company”
How the episode opens
Let's talk about longevity protection. To break it all down for us, I'm joined by Dan Gutman. Dan, thanks so much for joining me. — Thanks for having me, Sharon. — So, obviously, this is a pretty serious topic because when it comes to retirement security, folks may need income for, you know, even well beyond 30 years, right? So, the wealth management industry has obviously made tremendous strides and progress in helping clients grow their assets, but where do we still need to do a little more work when it comes to retirement security and longevity protection?
Well, thanks Shannon. We're we're here at the Horizon's Conference where everyone is talking about retirement planning and the opportunity ahead. And with today's market volatility, we've seen an increase in momentum and solutions that provide downside protection, but there's still a huge opportunity for protected lifetime income.
When you think about all of the risks that people face in retirement, from inflation risks to market risk, sequence of returns, geopolitical interest rate risk, longevity is the risk that magnifies all others, and it's one that you can't diversify away. The longer your retirement is, the greater chance that any of those other risks will actually throw it off track. And people are living longer as well.
There's 11,200 people turning 65 every single day here in the US. And there's a direct link between income and longevity. So for people in the top two income deciles, they're going to live three to five years longer than the average American.
That means a 65year-old couple in that demographic has over a 50% chance to living to age 95 or older. And as you mentioned, the industry has done a pretty good job of helping people accumulate and grow wealth. There's over $34 trillion of retail nest egg assets saved up today, but only about 2% of those assets has any form of protection to ensure clients have an income stream that lasts as long as they do.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- longevity risk
- retirement income
- protected lifetime income
- decumulation strategies
- retirement security
Companies and tickers mentioned
- PRU
- Prudential
Watch the episode
Watch “Why Longevity Protection Belongs in Every Retirement Income Plan” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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