In order to put a traditional retirement plan together for your clients, you basically need to know these five things:
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- How much money have they saved?
- What rate of return are they able to get on their savings?
- How much income do they need off of their savings per year?
- How long do they need the income for?
- What rate of inflation should we include?
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Naturally, you'll crunch all of these numbers to determine whether or not their savings will be able to provide them with the income they need for as long as they "plan" to live.
This seems so simple, right?
Well, there's a really big problem with this approach. In fact, I'd argue it's the single biggest problem with traditional retirement planning: You have to try and guess when your client is going to die.
Most people use average life expectancy tables, but averages include people who died at 60 and people who died at 100. And neither you nor I have a reliable way of predicting whether your client will die early, hit the average, or beat the odds.
Unfortunately, they are hoping they live a long life, yet the longer they live the lower the chances their money will last. It's a retirement Catch-22.
Related: 9 factors that affect longevity
If they get lucky (or should I say, if they've done really, really well), they will live to a ripe old age AND their money won't run out. But the chances of this happening are pretty low for the majority of people.
Consider this: There's a "rule" that says retirees can withdraw 4 percent of their retirement savings each year without depleting their balance or running out of money. But some planners now believe that this "4 percent rule" is outdated advice that doesn't work anymore in the current low-interest rate environment? And do you really want to stake your clients retirement on an outdated rule? Probably not.
To put it into perspective, if you were in need of open heart surgery and your doctor told you he was going to use outdated medical procedures, how would you feel? Not good.
With heart surgery, your life is at stake. With retirement planning, your client's lifestyle is at stake. If it's not handled well, there's a good chance your client could having to get back in the workforce in their proverbial golden years to make ends meet. 
Millions of Americans are worried about having enough money to last the entirety of their retirement years. (Photo: iStock)
A recent Gallup poll found that 59 percent of those surveyed were worried they wouldn't have enough money for retirement. This was by far their biggest concern.
How depressing is it for your clients to have to guess when they are going to die and then hope they don't live "too long"? Obviously, you don't want this hanging over their head while they're supposed to be enjoying their retirement.
When you build a retirement plan for your clients, it should cover them regardless of how long they live. Because there's actually a pretty good chance they'll live longer than we expect them to.
In 1980, only 2.8 percent of those 65 and older were age 90 or above. Today, that figure sits at 4.7 percent. And by the year 2050, experts expect it will reach 10 percent.
Average life expectancies are climbing fast, so you need to plan for the possibility of your clients living past 90.
Related: 90 is the new 70
Okay, so you're now aware of the biggest problem with traditional retirement planning. The question now is, what can you do about it?
An annuity may be an ideal solution for filling retirement savings gaps. (Photo: iStock)
