How Genetics Can Help Your Financial Health

Financial advisors have new tools to help clients plan for retirement. (Getty Images)

Will I outlive my money? That’s the No. 1 concern from clients and one the financial planning and wealth management industry has struggled to allay when helping people save for retirement.

But the answer to that question is only the tip of the iceberg when it comes to retirement planning.

How many active years will you have and what are the health care costs associated with increased longevity? Will you require long-term nursing home care or will at-home care suffice? Where would you like to live when you retire?

Thanks to recent advances in genetics and computer science, there are new tools available to provide clients and advisors with a clearer picture of your future health and financial needs.

Financial advisors have long looked for ways to make smart decisions with clients’ money, but more accurately planning for longevity needs in terms of health is something we haven’t been able to do – until now.

According to the Social Security Administration, a man reaching 65 today can expect to live 84.3 years, on average. A woman turning 65 today, 86.6 years. Yet, financial planners have historically structured portfolios on the premise that clients will likely live longer: men to age 90 and women to age 95.

These life expectancy estimates are just that – estimates, based on demographic data and population averages. Neither accounts for a host of factors such as hereditary risks and lifestyle choices that can drastically affect your projected lifespan and elder care expenses.

Does diabetes, heart disease or dementia run in your family? Do you exercise regularly? Do you smoke?

“These questions are meant to be conversation starters,” says Heather Holmes, founder and CEO of Genivity, a Chicago-based company that developed the software my firm uses to help our clients create a more-accurate, more comprehensive financial plan. “We show you your lifespan in relationship to your financial needs. If you can understand your future health care needs, you can better plan to pay for them.”

Genivity’s HALO (Health Analysis & Longevity Optimizer) assessment provides a comprehensive, 10-page personalized report of the clients’ current health status and projects what their health needs will be down the road. It also looks at how many healthy active years they’ll likely have versus assisted-living years and the costs associated with each.

The results can be staggering and eye-opening. And they can drastically alter financial plans.

Consider these two very different scenarios:

A married father in his 60s who was nearing retirement took the assessment and the news wasn’t good. He and his advisor discovered that his life expectancy wasn’t nearly as long as they had anticipated. With that information in hand, the client’s financial plan shifted from saving for retirement to wealth preservation for the next generation.

Another client, also a man but much younger, completed the assessment, which highlighted genetic health issues that greatly increased the likelihood he would become debilitated later in life. He was able to purchase long-term health care insurance and whole life insurance policies before it was too late to get the coverage he and his family needed.

Yes, the financial planning component of the assessment is essential. But, even more important, Holmes says, is that it helps people identify what they can do now to improve their longevity and the number of active, healthy years they can expect during retirement.

Holmes breaks down the assessment report into go-go (active) years, slow-go (assisted) years and no-go (home-bound) years. Among the biggest barometers of each category are lifestyle choices.

“So much is in your control,” Holmes says, who points to the following example as evidence:

A 42-year-old woman who plans to retire at age 60 and has a family history of cancer and diabetes can increase her life expectancy by more than 10 years if she doesn’t smoke and maintains a healthy body mass index through regular exercise and proper nutrition.

But this woman’s lifestyle choices can have an even bigger impact on her quality of life during retirement. By staying smoke-free and fit, she could see a threefold increase in the number of go-go retirement years. That’s more than 15 additional years she’ll have to fulfill her bucket-list dreams.

Of course, increased longevity and quality retirement years mean more out-of-pocket expenses. And that’s where financial planning comes into play.

The more information you and your advisor have, the better your retirement years will be. That’s why we take advantage of today’s technology and consider things like genetics, lifestyle choices and other factors when helping people plan for their future.

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