By Dr. James Flanagan

Financial Gerontology Understanding the Longevity Bonus

When I was ten years old in 1976, I noticed a strange phenomenon in my family of origin, the street I grew up on, and the city in which I lived. In the 1970s it was rare for people to live into their 80’s. In fact, according to a University of California at Berkley study of demographics in the United States in 1937, life expectancy was 58 for men and 62.4 for women. It was not until 1974 that it grew to 68.2 for men and 75.9 for women. Today life expectancy for a woman age 70 is 87.6 and a 70-year-old man 85.3 years. Average life expectancy has grown tremendously in the 20th century. Lengthening life expectancy has important implications for retirement planning and there are stark differences in how people plan when comparing retirement then, versus now. People used to live shorter lives. They saved more at an earlier age and retired later in life. Today people are living longer than ever and many neglect to begin saving until later in life while retiring at younger ages. This trend can harm a person’s ability to properly prepare for a comfortable retirement. It is important to note that aging is heterogeneous and not normative. In other words, there is no one way to age and the path of every individual is different. Additionally, aging is not synonymous with disease. Not everyone will experience significant cognitive decline or physical disability as they grow older. There are people that live until old age and death without experiencing either of these phenomena. We do know for certain that as people age, they will encounter significate life transitions that will require reaction and adaptation and many of those key pivotal events will require the need for consulting professionals of insight and direction. Financial preparedness shapes many of these events. The expertise of a Financial Gerontologist, a trained professional who understands financial planning from a life course perspective, cannot be understated.

What is Gerontology?

“Financial Gerontology” was established as a discipline in 1988, according to Neil E. Cutler, Ph.D., President of the American Institute of Financial Gerontology. Gerontology, which is the study of the biological, psychological, environmental, and social aspects of aging, has been studied by Psychologists, Sociologists, and Anthropologists since the early 1970s. The importance of understanding the role of Gerontology in the financial planning process cannot be understated. Since 2010, 10,000 people per day turn 65, and by the same statistical number in 2022, we can assume that 10,000 people are now turning 75 every day. The fastest growing segment of the population is people over age 80. Financial Consultants with sound gerontological training are uniquely positional and will ultimately be responsible for helping people navigate the stages and ages of life. Financial Gerontology is moving to the forefront of tools that successful consultants will need to advise 44 boomers and generations. Schools of Gerontology across the nation are spending considerable energy at special research centers at places like USC Davis School of Gerontology, MIT AgeLab, University of Nebraska at Omaha, University of North Carolina and Duke. It is difficult to conceptualize how one can advise people in later life if they do not have a solid grasp of what the process of aging is and how it unfolds over the life course.

The researchers at these Universities are not studying “old age” or “old people”, instead they are investigating the many different ways people age and how personal choices in life contribute to later life outcomes. Aging is conceptualized not as an event but rather a series of events over a lifetime. This lens is called the life course perspective.