Why Longevity Literacy Is the Missing Piece in Financial Planning

"Will my money last?"

I hear this question from clients in or near retirement more than almost any other. These are people who saved consistently, stayed invested, and never abandoned their financial plans during market volatility. What they accumulated matters enormously, but what keeps them up at night is something the financial industry has been slow to address directly—the possibility they might live longer than previous generations and outlast their savings.

Living to 100 used to be an exception, something actuaries noted and families marveled at. Today, it is a planning reality. When Social Security was created, Americans didn't live much beyond the age at which they became eligible to collect it. Today, a 65-year-old has roughly a 1 in 3 chance of living to 90 or beyond. Women could spend decades in retirement.

Although older clients are aware they could outlast their savings, the following number stopped me in my tracks: Only 26% of millennials anticipate living 30 or more years in retirement. This means 3 in 4 members of an entire generation may be grossly underestimating how long their money needs to last. This is something we as an industry must remedy.

TIAA Institute research points to something deeper than a savings shortfall. Most people build their financial plans around a retirement that ends a decade or more before it will. This gap isn't a math problem, but rather a perception problem. Only 1 in 3 U.S. adults can correctly identify the average life expectancy of someone who has reached age 65. Workers who expect a short retirement save less, plan less, and are far less likely to seek professional guidance. Misperception prevents the very engagement that could correct it. Knowledge comes first. Behavior follows.

I have come to believe that a lack of longevity literacy, not just financial literacy, is a root cause of retirement insecurity in this country. This isn't just a research conclusion; it is something we see play out in conversations our advisors have every day. When a financial plan is built around an accurate picture of how long retirement can last, the entire nature of the advice conversation changes.

What the industry calls longevity risk, I prefer to think of as a longevity blessing. I chose this phrase when I was thinking about my own family and the families of friends and clients who are blessed with parents that have lived longer in retirement than "normal." Extra decades of life should not be a liability that needs to be managed. They are years that deserve to be funded and lived fully. The job of a financial plan isn't just to grow assets; it is to sustain them across a horizon that may stretch 25 or 30 years, or even longer, and to give someone the confidence to spend and live, not just accumulate and worry.

There is no shortage of financial information available today. What many people lack is someone they trust, who can take this information and connect it to their specific needs, their family, and their timeline. Our research confirms what that relationship is worth: Advised households report an average net worth more than double that of non-advised peers, even after considering income, savings, and other factors. Even advice received at the point of retirement may increase sustainable annual income by 10%. The window to benefit is always open. Financial advice isn't just for the wealthy, or the young, or the old. Our challenge, and our responsibility, is to get it into the hands of more people, at every income level and every life stage.

My time at the U.S. Treasury during the 2008 financial crisis taught me that individual financial fragility doesn't stay contained. Lack of confidence in institutions spreads quickly and destructively. When millions of people enter retirement underprepared, it reshapes consumer spending, strains healthcare systems, and creates demands on social services that affect everyone. Lack of confidence is creeping back in, and it will not resolve itself.

I believe that every client conversation should have longevity as a foundation, not as a footnote. Yes, this applies to our youngest and oldest clients and changes the nature of the advice. I challenge every advisor, every employer offering a retirement plan, every consultant considering an investment menu where guaranteed lifetime income products are available, and every policymaker working on retirement security to make the same commitment. Employer matches and product choices matter. Policy reform matters. None of these will close the gap if the person at the other end of the decision doesn't understand the timeline that he or she is planning for.

People don't save for a future they don't understand and can't picture. The industry has the tools, the research, and the relationships to change this picture. The conversation begins at the dinner table, in the advisor's office, and in the boardroom. Because longer lives deserve better plans, and the people living them deserve to know it.

David Nason is chief executive officer of TIAA Wealth Management & Advice Solutions.

Editor's note: Guest commentaries like this one are written by authors outside the Barron's Advisor newsroom. They reflect the perspective and opinions of the authors.