People are living longer and planning for longer retirements, which is why The Stanford Center on Longevity and Wells Fargo Wealth & Investment Management published a new report on longevity risk. Joseph W. Montgomery, CFP®, AIF® of The Optimal Service Group of Wells Fargo Advisors shares some of the key takeaways.
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People are living longer. A hundred years ago, the average life expectancy was 53 years. Today, it's jumped to almost 79. This dramatic increase is great for humanity. But it brings new challenges, such as planning for a longer retirement. Joining us now to discuss a new report on longevity risk is Joe Montgomery. He's Managing Director Investments at the Optimal Service Group of Wells Fargo Advisors. Joe, what are some of the key takeaways?
Hi, Jenna. There's a lot to unpack here in this kind of study. Most interesting is probably just the realization
that people have a 50% increase over a hundred years. So if you then take the past and relate it to the future, you think about where we're going to be. And it's not me or you but even just the children born today, how much longer they're going to live. But it is pushing everyone to think more about planning and am I going to be OK? With the holidays right around the corner, you say you've been thinking a lot about A Christmas Carol.
On that note, what can we learn from Scrooge here?
Well, Ebenezer Scrooge had past, present, and future. And it's interesting that the past and the present are really, when he went through them, really what stimulated his interest in the future. And as you recall, he asked, does the future have to turn out this way? And so I think for a lot of people, they're using it-- at least the way I think of it, they're starting to look at the future where I think they were so tied up in a pleasant present-- let's call it-- that the pandemic has really stimulated them to think about longevity, the future.
Am I going to be OK? And recent surveys say that people believe the pandemic has permanently impacted their ability to retire. Should this be the case?
And how are you helping clients navigate this time?
Well, it's all individual, of course. And it depends on their situation. But I think the very fact that people are paying attention to it and have that concern means they have an opportunity to fix it if they're not right. And so the earlier they address it-- I actually had a 26-year-old question me about this and about them planning. I don't remember many times in my life where I've had somebody come up and want to talk to me at 26 about how they might take care of their children. And they don't currently have any, and they're not married. So there's a mind change or a shift going on, I think, in the population. And they are much more focused
on this than they've ever been.
And with an extra 50% of life
over the last century as you
mentioned, how are
you talking to people
about the difference
between biological age
versus chronological age?
Can you explain that to us?
Yeah.
That's a great thought I think
about thinking biologically
because you see so much more now
books written about lifespan,
the hundred-year
life, all these things
that people are
starting to focus on.
And so really what they're
capable of doing at greater
chronological ages, it's
really quite amazing
when you think about it.
Look, Tom Brady,
who didn't have a--
he's 43 I think now.
And you look at Drew Brees.
He's 41.
They're playing high-level
professional football
at what would be for football
an advanced chronological age.
So they're really
good examples of what
determining what your biological
age is being really important.
And I think you're seeing
more and more of that.
And we're seeing more and
more of it tied back into,
how do I finance that?
And that means getting the risk
right and the allocation right,
which are interesting
because those are themes that
have been true 50 years ago.
And they're true today.
Yeah.
To that point, just as
people are living longer,
they're also sometimes
working longer and perhaps
getting a college degree
much later in life.
They're just doing
things differently now.
Yeah, absolutely right.
And I think there's some
school of thought that
says we'll go from the
three stages of life
being education, work, and
retirement to more of a four
stage, which will be maybe
two types of employment
or just continuing what
they're doing because they can.
Extreme examples like I just
mentioned in athletics where
people are actually
playing longer,
but it's also true in
business and other things.
Conversely, you're seeing
people making the decision
to retire from their current
life to do something else.
I've had several
instances of that
personally where
people that I know
have decided to quit
doing what they're doing.
But they're not
going to quit doing.
They're just going to quit doing
what they're currently doing.
And they're going to
do something else.
And a lot of people
want to know,
am I going to be OK,
especially in retirement?
And Monte Carlo
simulations can help.
How do they do that?
Yeah.
Well, it's just probabilities.
Probably an unfortunate
name, Monte Carlo,
because it connotes gambling.
But it's really just the
probabilities of success.
And that to me is--
it's becoming more
and more important.
20 years ago or more when a lot
of that started to come out,
I don't think
professionally there
was a lot of interest in
it because people just
didn't really see the need.
They weren't asking,
am I going to be OK?
Because they didn't have
the extended retirement.
I think now people
actually ask us
that, we've developed
systems so they
can play what-ifs on their
own with their accounts
to examine it.
It's a clear shift because it
measures risk and helps people
get a handle on, are
they going to be OK?
Can they retire early?
Should they retire early?
What happens if they work
in a different fashion?
We run into that a
lot with entertainers
because they have more limited
life spans at least from a work
standpoint.
So running those at various
ages where you wouldn't normally
think it was as
important, 35, 45,
I think people are
very interested in it
at much earlier ages.
For many people too,
longevity planning
is an opportunity to revisit
their planning, sort of
Back to the Future scenario.
Yeah.
Yeah.
You don't have to get in Doc
Brown's DeLorean on this one.
But it helps to, again,
think about looking out
and what can you change?
So whether it's Michael
J. Fox or whatever,
or whoever it is thinking
about Back to the Future, to me
it's really getting us to what
we should be doing anyway.
That's what you
want people to do
if you're sitting in my seat.
You want people to
look at and in essence
put out what-ifs about
what they might like to do.
That's the part
about the future.
And then we determine
whether it's realistic.
And that has proved to be very
effective through a number
of cycles now.
So I think our confidence in
it has gone up quite a bit.
And I think our clients have.
They ask for it.
And as the complexity
goes up, the request
for conversations about all
of this goes up as well.
So staying organized
and disciplined
is extremely important, not
only for advisors, but also
for their clients.
Would you say that
refining the client's plan
is more important now than ever?
I would definitely say
it's more important
now than ever because people
have learned that they need it.
And therefore, they want it.
And we've got to deliver it
to them on a timely basis.
Interestingly enough,
this whole pandemic
has created an interesting
opportunity because
of the use of the video
tools and sharing information
and getting it out there.
We're now able and have
been for some time--
we've done this
before the pandemic.
But we're doing it--
instead of once a week,
we're doing it twice a day.
So it's helped us leverage
up, the technology has.
And they very much want that
information distributed.
So we've got to
find ways to do it.
Finally, Joe, anything
you'd add about this report
that you published with the
Stanford Center on longevity?
Well, for me, I
think that report
was validation about what's
going on in our profession
and also what's going
on in the world.
And when you have people
like the folks at Stanford
backing it up and supporting
this kind of analysis,
it all leads to
the idea of helping
people address the issue
of, are they going to be OK?
And it's amazing, whether
it's 10 years or 20 years,
it's always sort of
been the same thing.
It's just more important
today than ever.
And this kind of information,
this kind of report,
really helps to move people
to the right solution.
Well, Joe, always
great to have you.
Thank you so much
for joining us.
Pleasure to be with you.
You all be safe and well.
You too.
And thank you for watching. And that was Joe Montgomery, Managing Director Investments at the Optimal Service Group
of Wells Fargo Advisors. And I'm Jenna Dagenhart with Asset TV.