When planning for your financial future, shoot for the record!

Did you see the headlines last week? The Guinness Book of World Records crowned someone new as “the world’s oldest person.” A mother of five, Kane Tanaka was born in 1903 and married in 1922 at just 19 years old. Today, at the ripe old age of 116, she studies math and other subjects for fun (a woman after my own heart!), competes at the board game Othello, and loves chocolate. It would be wonderful to be so lucky! But only if you plan for it…

Whenever I work with a client to create a financial plan, we plan for a very long life. Why? Because, in reality, no one knows exactly just how long they will live. (As a physician, you may be more aware of this truth than most!) And yet, when it comes to making the small sacrifices that help ensure you won’t outlive your assets, it can be easy to balk. After all, if the average life expectancy in the US is 78, why save to live until 95? The answer: as in many other areas of your life, you just may be above average.

Want proof? Just take a look at the data:

A 2015 study by the National Academy of Sciences (NAS) found that among men born in 1960, those in the top income quintile had a life expectancy that was 12.7 years longer than men in the bottom income quintile. The study found a similar pattern among women, with women in the top income quintile outliving their peers in the bottom quintile by an impressive 13.6 years[1]. Here’s the chart from the study that illustrates the differences:

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Of course, living longer is a nice problem to have, but without proper planning, it can put even the most affluent physician and their family in a less-than-perfect financial bind—especially if they find themselves breaking records. Here are the facts: markets aren’t always predictable, and actual life expectancy can’t be calculated. That’s precisely why after reading the study when it was published in 2017, I immediately began increasing the life expectancy to 95 for every one of my clients. I also began padding each plan by a minimum of $300,000 per person. My reasoning was simple: the last thing I want for any of my clients is to see them outlive their money!

Financial planning almost always involves a delicate balance between spending and saving. Every situation is different (which is why you should always ask your financial advisor for personalized guidance, with a close eye to the Common Plan and other KP benefits), but for high-income physicians, your high life expectancy demands that you start with a conservative baseline when it comes to your life expectancy. Doing so will give you the greatest chance of achieving a happy and successful retirement, no matter how long you live.

And if, like Kane Tanaka, you are lucky enough to beat the odds, chances are you’ll be in great shape financially—even if you need a little help blowing out all those birthday candles!

[1] Congressional Research Service, “The Growing Gap in Life Expectancy by Income: Recent Evidence and Implications for the Social Security Retirement Age”, 2017

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