Ep #157 - Longevity Is a Gift. It’s Also a Planning Problem.

Wouldn’t it be stressful to feel like you’re going to live longer than your plan was built for? In this episode, Adam and Ben explore longevity risk through a different lens. Not just the math of running out of money, but the mindset of spending, the uncertainty that comes with a 30+ year retirement, and the challenge of balancing security with actually enjoying life. They walk through how retirement really unfolds over time, why spending isn’t linear, and how thoughtful planning can create a dynamic portfolio withdrawal plan. From guardrails and income floors to the role of long-term care, this conversation is about building a plan that adapts as life changes. Because a good plan shouldn’t just help your money last. It should help you live. 

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Transcript

[00:00:00] Ben Haas: Hi everyone, and welcome to AB Conversations, where we will help you CFP your way out of it. A podcast where you get into the minds of a couple certified financial planners on how we think and feel about everyday financial planning questions, and what should really matter most to you. A healthier financial life starts now.

[00:00:27] Ben Haas: We've titled today's podcast, "Longevity is a Gift", but I think you and I are gonna also admit here that it can be a planning problem. And we'll start with maybe a question, if we sat across from a client or somebody that's maybe looking to work with us focused on retirees here, and we said there's a good chance you're gonna live into your nineties.

I wonder how the reaction would go, right? Would they be very great? Yeah. I'm sure they'd be grateful, right? That's why we're saying longevity would be a gift to live a long and healthy life. But I also imagine that the reality is that comes with a lot of anxiety, right? We know that the longer we live, the more potential we're gonna run outta money.

We know there's a heck of a lot of motions flipping that switch from saver to spender. So, I think it's really important for you and I to kind of talk very candidly today about the role of a financial planner here when it comes to planning for longevity. Wanting that to be, of course, best case scenario, long and healthy life, but knowing there's a lot of anxiety that's gonna come with that and how that can be potentially a planning problem.

So .

[00:01:29] Adam Werner: Yeah.

[00:01:30] Ben Haas: Help me go through this today.

[00:01:32] Adam Werner: Yeah. And even what you just said there in terms of, you know, if we sat down with somebody and said, "Think about living to age 95," and kind of what is that visceral reaction? And I mean, how many times have people just laughed when we have said that? And they say, well, I'm not even gonna make it anywhere close to that.

So I don't need to, I don't need to plan as if because I know, like, that's just not gonna happen for me. But to your point, that is absolutely a planning risk and

something that we believe needs to at least be addressed and strategized around, 'cause it's not just running out of money, right. It's, which I think is often that first thought.

Like, if I live a long and healthy life and I'm doing the things that I want to do I have enough money?

[00:02:14] Ben Haas: Right? Yes.

[00:02:14] Adam Werner: That's going to last me to the end. But there are so many different variables that are going to affect that. It's, what is it? The impact of inflation over decades is just huge.

Right here we're in 2026. If we looked back 30 years to 1996, what did a house cost? What are the car costs? Just all of those things that, we're like the frog that is just slowly being boiled in the pot, right? Over 30 years of inflation and this is just kind of the new reality. But when you try to think forward 30 years, I think that math just gets a little bit harder to kind of wrap your brain around.

So it's, again, it's not just running out of money, but the, it's that earlier part of retirement and you know, that potential mind game of if I'm fearful of not having enough or that I'm going to run out or that I'm gonna want to need it later, then I can't be spending as much now. I need to preserve these dollars.

I'm in that scarcity mindset and not the abundant mindset. And then I need to just be much more careful with my spending in the short term.

[00:03:22] Ben Haas: Yeah, and I think that's why it's, that's why we're gonna title this, it becomes a planning problem because you and I have a very strong opinion that part of our responsibility to our clients is to try to have them live their best life, right?

To us, that means that money's just a tool, right? We know that we are here to help them accumulate, get to that spot in retirement where they feel confident moving into that phase of life. But then we don't want them just sitting around still in like conservation mode. The goal is to be able to be excited about spending time and spending money on things that are very fulfilling for them. So those things that got pushed aside, I don't have time to do this while I'm working and I'm raising kids, that this is a whole new phase of life. So I'm glad you created the segue here. What we're trying to do is kind of marry these two things.

We need to make sure that you're comfortable not making sure you're not outliving this pool of money that you set aside that now is going to be finite. Mm-hmm. But that you're also not sitting around not spending it, not enjoying it, if it would serve you in a very fulfilling way.

[00:04:25] Adam Werner: Yeah, and I think so something I forgot to mention earlier, just kind of one of those other variables or just think again, it just comes from that mindset of, well, but I might need it later so I can control what I'm spending now and I can forego these things that in our opinion, may enrich their lives.

Right? Bring fulfillment, do be the things that they can see and do now. But just the idea of, well, I'm not gonna do it now because I may need it later, because long-term care costs may be a thing in my future. Right? Just the rising cost of healthcare for retirees, right? Just kind of that acceleration later in life.

So the, I can control what I can control and if that means not spending today so that it's there in case I need it in the future, like that's just such a normal, healthy way of going about it. But then it does lead to these other dominoes of yes, but are there things that you could be doing today and still not jeopardizing paying for you know, care in the future and just being able to give some more context to those decisions in the short term.

[00:05:26] Ben Haas: I hope that's where we can also talk people through our experiences, right? We're not that one individual who's going through retirement for the first and only time. Yeah. We work with all these people and recognize that there are just different phases of life.

We do talk about retirement in those phases. There are typically those, we call 'em the go-go years where i'm retired I'm healthy. I've got all these things I want to do and experience in life. And yeah, that may mean that I'm spending more early in retirement. But then the reality is, and studies will show that as we age and kind of slow down, those are the slow go years.

There just isn't as much spending before the no-go years, which ironically enough, even if we're maybe not out spending as much needing to care for ourselves and healthcare, you mentioned it earlier, long-term care, those are typically when that spending comes back up. Right? It almost looks like a retirement smile.

So the challenge is just to accept the fact that spending's not going to be smooth and we shouldn't assume it's going to be smooth. Yeah. Because that's not how life works.

[00:06:29] Adam Werner: Well. Right? And even just something as simple as, you know, I know this is now a finite pool of savings and investments. Just the emotional impact of that.

Sometimes it just as is as simple as well, but the, my outlook on the markets, right, just being through that lens of fear and. Yeah, I know things have been okay for a little while, but when's the next shoe going to drop? Yeah, right. When is the next crash going to happen? And I need to be prepared for that.

So I'm not gonna spend, I'm not gonna use these investments because they're gonna dwindle at some point in the future. And I'm just gonna be, I'm gonna, I want to preserve as much as possible so that when I go through this potential downturn or, you know, this pullback at some point in the future, it just lessens that overall blow.

But again, it, that just. That's a difficult spot for somebody to be in.

[00:07:17] Ben Haas: Right?

[00:07:18] Adam Werner: And certainly in our opinion, doesn't lead to them doing the things that we believe are what they should be doing in retirement. Enjoying the fruits of their labor, right? Aligning their money with the things that are important to them.

[00:07:30] Ben Haas: This is where the, like the good meat of the podcast has to come into play. How do we help? Right? Yeah. And I think there's just so much information out there and we certainly work with a lot of people who want to be well read, who kind of understand some of the fundamental things that are out there about retirement, that there's a 4% spending withdrawal or there's strategies called guardrails or the any different thing.

[00:07:54] Adam Werner: Yeah

[00:07:54] Ben Haas: What you and I were having a conversation on not that long ago is that there is like this math side of things where we can talk high level, like practical, how we're gonna help people with Yeah. But there's still a human and everything that you just talked about, the different phases of life

they're gonna go in, there needs to be some sort of like math, but partnership that mm-hmm.

Speaks to a very. Flexible environment, or we'll use the word, a very dynamic spending that allows them to just have the context they need, but has us meeting them where they are when they need us to be there. So just want to kind of set the stage of this is where like traditional portfolio management still needs to meet.

We are planning partners in this and there's a very human side of it.

[00:08:39] Adam Werner: Yeah, and I mean, we've talked about it ad nauseum that whole idea of the 4% withdrawal rate, and as you said, like that is, that's one of the cleanest ways of going about it, right? It's, I can do the simple math and if I stick to this over a long period of time, the market's gonna ebb and it's going to flow over time.

But as long as I kind of stick to this reasonable withdrawal rate, odds are I'm going to be, I'm going to be okay. But like you just said, spending doesn't happen in a straight line,

[00:09:10] Ben Haas: right?

[00:09:10] Adam Werner: Because of the different phases of retirement. But also, you know, just in our experience in working with clients, the best intentions on, well, I'm gonna do this project on the house this year, and then next year I'm gonna do this project and then I'm gonna need a new car.

And you can have the best laid plans on, I'm gonna evenly spread out my spending. But we all know that is not how life works, and that can quickly potentially derail, you know, some of those spending decisions in retirement. If, you know, there's one big year or a couple years grouped together where just spending is elevated, it can very easily lead to, okay, well I've now spent all this and I just need to completely, you know, turn off the faucet for a period of time, and maybe that doesn't necessarily need to be the case, right?

That idea of the dynamic changing the withdrawal strategy based on market, environment, market the timing of right, kind of where is the market at, where do we see things headed? And hope that you can just smooth out that ride over time of how are my savings and investments doing, how is my withdrawal rate compared to that? And it doesn't necessarily need to be that real static black and white. I'm either above the 4% and I'm in danger. I'm below the 4% and I'm

good. There's gonna be some give and take there, but I think the, there still needs to be some context right or perspective around that.

[00:10:35] Ben Haas: Yeah. I think the easiest way for people to kind of relate to where they are with spending capabilities, it's still just cash, right? We go through our whole working lives, like needing to have bills paid, having money in the bank, and the first place that we're gonna look when something goes wrong, whether, you know, like you said, a, the car needs to be replaced, or, I got this project at the house.

Well, what do I have in savings? And if I have it there, it feels easier to spend where when we talk about this portfolio and needing it to be there for like the rest of our lives, there's just a little bit more of a mental disconnect between, well, yeah, but am I killing the goose that's gonna lay all these golden eggs?

So I think the first thing that we want to talk about with just like flexible dynamic spending is it's always good to have some sort of understanding of what cash is there. Have a planning partner like we want to be for our clients with, we're gonna generate that cash. Good times, bad times. We're gonna be in good communication with what you think may be coming up, so that we're always just holding enough cash.

[00:11:38] Adam Werner: Yeah. And so on top of that too it's having a floor of income in retirement, right?

[00:11:47] Ben Haas: Yes.

[00:11:50] Adam Werner: There are, there, there are some interesting studies I think coming out around this, but for most retirees, they're gonna have social security as their baseline, right? If I don't need to touch savings, I at least I'm gonna have social security coming in.

There's certainly some people that still have pensions, even though we know that is a dwindling thing. So that is becoming less and less common for us to see. But then you start to stack on annuities, right? We've talked about annuities. They have a role or they can have a role, but where we often see them maybe playing a behavioral, kind of a psychological role is all for that guaranteed income.

You're essentially creating your own pension from something like annuity, where now you have that hopefully some peace of mind to know that no matter what happens in the economy, no matter what happens in the investment

markets, I at least know that this is what my income is going to look like, no matter what.

[00:12:43] Ben Haas: Right? Yeah.

[00:12:43] Adam Werner: Right. It's irrelevant to what, what's kind of moving in the markets and hopefully, right the way we were kind of brought up in the business, there's the needs, wants and wishes, and as long as your needs are taken care of with this fixed income, that's not going to change.

Then you can start to layer on the discretionary or the dynamic spending kind of over and above that, but the idea that people are more apt to spend when there is that guarantee when it is fixed versus the that, well, if I'm taking, if I'm getting, I'll just use an example. If I'm getting $2,000 a month from Social Security, most people are going to spend that differently than getting $2,000 from their investments every month and wondering should I be taking less than this 2000 to make sure that I can take more over time. So just that idea of that guaranteed income often leads to people spending more in retirement because they know it's gonna be there the year after that and the year after that, and the year after that.

[00:13:43] Ben Haas: I like where this is going 'cause let's continue to stack these ideas on, okay, we're making sure there's cash. And most people, like even in the bank account, I'm thinking of one client who you and I were just referencing a little while ago. There's like five different bank accounts, but why?

Because they have specific purposes. This is for the vacation fund. This is where I pay for trips and taxes. This is my fun money. This is the money market for whatever. Stack on top of that. Now you're saying, you know, other guaranteed income that, that you know is coming in. I think where we really should focus now is then how do we go about that other dynamic part then that maybe does, it's harder to connect the ideas of what I'm able to spend outside of bank accounts when it just feels like this big retirement account over here.

Sometimes it's making money in bad markets, it doesn't look good. And I think that's where you and I can maybe shed some light in, well, the, we just need to figure out what works for them. Right ?I hate to give the answer that how we're going to invest in, you know, what we're gonna do for withdrawals really depends on them.

But it does. Mm-hmm. Right? Yeah. And one way we can just talk and educate is just, again, thinking about different time horizons and different periods of time, it's not to focus just on, well, is the market good right now, but how do we smooth out withdrawals over time? And that's where, you know, endowments spending policy statements, think of these big institutions.

How do they do it? Well, they're just looking at rolling returns, right? So if we look at the last three years of returns and average out what it was. That really negative year that might've like happened in 2022. Right? The most recent time we went through that, it's still kind of bracketed by 2021 and 2023 and 2024.

Really good years in the market. So it just gives this opportunity to kind of not view bad markets as well, now I can't spend. It's well still, how is that within the context of the last couple years to make sure that we're not spiking spending because, hey, it was a really good year. Let's just spend it all, but we're also not like stopping spending when you have that negative year.

[00:15:46] Adam Werner: Yeah. Yeah. And it's interesting because, you know, going back to kind of that, that static 4% kind of idea, you know, this idea of a more dynamic guardrails or just, you know, going with the flows of the market. I'd love and I will share this, is, this is not something that we've really implemented.

We're, I think we're getting there, right? This idea of the flexibility because it is just such a human element to all of this where you just, you can't math your way out of a human problem like this. But yeah, just something as simple as, we're gonna use time right on our side to just average out, to smooth out those ebbs and flows.

Because I've certainly read enough around spending plans in retirement and yeah, when the market's good, you can spend more. When it's not doing so great, you need to spend less. But to not be whipsawed from a spending standpoint. Exactly. 'cause I'm just trying to put myself in the client mindset of, okay, but if this was the year I'm gonna do the blowout family trip to Disneyland and now the market's down, and now I don't feel like I can go do that. Or, I'm gonna still go do it, but I'm gonna feel guilty because now I'm worried about the what if in the future. Yeah. Just that whole scenario, just none of that feels good. So yeah, I think just, it's a different way of looking at it.

And I have to give the credit to you, right, the whole endowment foundation idea of just, you know, spreading out those returns and using actual, you know, history for that person to then inform what is a reasonable withdrawal at any

given point in the future. It just it's a very easy way to just, again, you smooth out the peaks in the valleys.

[00:17:30] Ben Haas: And it's not. I mean, thank you for being transparent. We're always gonna be transparent on these podcasts or with clients. We just don't want to go into that situation and say, well, well just trust us. Like we're never telling people to spend money that we don't think they can. It's finding the ways to not only communicate that or figure out the practical ways to do it.

We are starting to implement spending accounts like we're just telling people we're gonna move money into this account and we're gonna judge success by how little is there. Find a way to spend it to try to bridge this gap that we were talking about earlier between, Hey, I'm excited to do these things in life, but if I live to age 100, like I just, I feel like I need to conserve.

Yeah, we're gonna do that mental accounting and find the practicality for them. It's very easy to do when that's like a non-retirement account where we can kind of just shift money. Yeah. Where I think it becomes a little bit more difficult is within this retirement account realm where, okay, you've got one big retirement account.

So when you log on to kind of see how you're doing or hey, what am I capable of spending, you're not disconnecting that from the long-term productivity you want that to have. So there's almost like another way that we need to go about making sure when there are these really good years, maybe it's not sending it directly to a spending account, but it is to kind of start setting it aside and saying, alright, I had all these gains.

Let's do both things here. Let's move some money into a place where it's accessible for you. You see it, you know it's there for you. It's even gonna be there for the next rainy day, but you still have this other portion that it's invested for growth just so you can continue to try to, you know, beat inflation.

[00:19:05] Adam Werner: Yeah. And the thing is, with that type of approach, it's not gonna work for everybody, right? Because it's gonna be somewhat defined by their preference, their view on these different moving pieces and what's gonna actually bring peace of mind. I think a lot of what we're talking about are going to, it's going to fit for a lot of people, but it is still, it's, it is still a very specific thing.

Right. And we're almost, you're almost just playing tricks on yourself, of some, something as simple as. I'll just, I'll think about long-term care insurance, right?

We've talked about that in, in different podcasts over time. But just that idea of acquiring long-term care insurance just feels daunting because it feels like I need to make this decision once, and I'm gonna be committed to it one way or the other.

Either I'm not gonna get insurance coverage and I'm just gonna self-insure with my savings, or I'm gonna get this insurance coverage, but by the way, it's still insurance. So it could be expensive depending on the situation. And I'm hoping, I never need it also, by the way, but where we kind of view that and that this like righteous trick that you can kind of play on yourself is, it doesn't, I think people are looking through that long-term care, you know, insurance lens is, I need to fully ensure, you know, for a total loss where you think about that from your home insurance, your auto insurance.

You think, what if there was a catastrophic loss? It can be something as simple as, but having some coverage, even if it's not going to pay the full bill of a long-term care event, it takes the pressure off of my savings to some degree in the future, which we would hope bring some peace of mind to maybe allow people to spend a little bit more in line with what they would want to do earlier in retirement because they know they at least have some backstop against some of those very, you know, undefined and uncertain costs of what that could look like, you know, 20, 30 years from now.

[00:21:05] Ben Haas: Yeah. Another important variable there. So I'm glad you brought that up. I guess to kind of wrap these things together, the whole point here is to find what's gonna work for somebody, because we don't want there to be, well, let me put it this way. There is a danger to kind of like just overprotecting, you know, for the future at the cost of just living the life you wanna live right now. And there's a lot of emotional work and like giving yourself permission to just enjoy it. So I think as we continue to evolve, not only how we go about things, but how we communicate it and wanting to bring like elevated value to every relationship.

It's not just asset allocation anymore. It's not just 4% withdrawal rule. These are good foundational things. It is the partnership along the ride, knowing when things are going to pivot, and , able to make very quick pivots either in the way that we're like logistically running it or that we're just talking them through those difficult points.

[00:22:02] Adam Werner: Yeah. Yeah. I couldn't have said it any better.

[00:22:06] Ben Haas: Well, then I guess that's a good way to end it. Thank you.

[00:22:08] Adam Werner: Perfect.

[00:22:09] Ben Haas: Thank you for your time again today.

[00:22:12] Adam Werner: Alright, catch you next time.

[00:22:12] Ben Haas: See ya. Bye. Hey everyone, Adam and I really appreciate you tuning in. Please note that the opinions we voiced in the show are for general information only, and are not intended to provide specific recommendations for any individual. To determine which strategies or investments may be most appropriate for you, consult with your attorney, your accountant, and financial advisor, or tax advisor prior to making any decisions or investing. Thanks for listening.