Don't forget retirement risks.The shortcomings of many financial plans today is that they are set up to last to a retiree's life expectancy Life Expectancy
1. The age until which a person is expected to live.
2. The remaining number of years an individual is expected to live, based on IRS issued life expectancy tables. , usually 85 years, thus impoverishing some retirees by design, said Brian Perlman, a member of market research firm Matthew Greenwald & Associates and holder of a Ph.D. in psychology. While most planning takes into account inflation, it often doesn't address the costs of health care and long-term care long-term care (LTC),
n the provision of medical, social, and personal care services on a recurring or continuing basis to persons with chronic physical or mental disorders. , and it may overestimate annual inflation-adjusted withdrawals from assets or underestimate the results of human inclination to overspend o·ver·spend
v. o·ver·spent , o·ver·spend·ing, o·ver·spends
To spend more than is prudent or necessary.
The new retirement-planning paradigm will hold that both investment risk and life risk can deplete de·plete
1. To use up something, such as a nutrient.
2. To empty something out, as the body of electrolytes. a nest egg Nest Egg
A special sum of money saved or invested for one specific future purpose.
Examples of the purposes for which nest eggs are usually intended include retirement, education, and even entertainment (vacations and cruises). . New Financial plans will also take into account retirees' values--their willingness to risk future poverty, for example--and their goals, such as leaving money to heirs.
Studies already have shown that income annuities reduce both investment risk and longevity risk. The new paradigm will further open doors for insurers, both in product design and insurer skills, Perlman said. For example, buyers of income annuities today expect to live on average to age 95, but new underwritten annuities could provide higher periodic payments to those not likely to live that long. The new paradigm also could spawn a need for a more "agent type of adviser" he said.