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How Will Extended Life Spans Affect Benefits?

Originally posted on June 15, 2015 by Marty Traynor on benefitspro.com.

Perhaps you saw the Time magazine cover, featuring a cherubic baby and the caption, “This baby could live to be 142 years old—Dispatches from the frontier of longevity.” The articles describe several of the advances being made in extending the human life span well beyond the three score and 10 cited in Psalm 90.

The article got me thinking about the potential impacts of extended life spans on benefits. In today’s world, we’ve begun to identify life cycle needs of employees and their families. We in the voluntary business have been doing this in enrollment meetings for many years.

Technology hasn’t changed the messages, just refined them. Voluntary enrollment systems and exchange systems are being built with life cycle logic in them. In the end, people with young families tend to need lots of term life insurance; people approaching retirement are in need of asset preservation products like long-term care and critical illness, and so on. What will our messaging be, though, in the world of a life expectancy at birth nearly double today’s?

Today’s millennials are putting off such decisions (and triggers for benefit needs) as marriage, home purchase and raising a family. In the future, it’s likely that the waiting period between education and commitment will continue to increase. Surely accident coverage will be more emphasized than today, since most diseases will be cured or prevented by enhanced treatments in the future and the greatest perceived risk to good health will be accidents. In fact, life insurance rates will probably approach today’s AD&D rates into a person’s 40s and it will hardly make sense to discuss “permanent” life insurance until a person is 50 or so.

Plus, the entire concept of retirement is likely to change, as people begin to experience multiple careers. Government benefits like Medicare and Social Security will change radically. Longer life expectancy will mean these programs will need to be able to pay benefits for decades more than their current design anticipates.

Insured benefits will need to change as well. Disability benefits based on retirement at age 65 with reduced benefits for those working after age 65 will become obsolete. Group life insurance reduction schedules will be, again, obsolete. For retirement planning, products in the immediate annuity family need to be revised.

But the biggest change will be the expectations and attitudes of individuals. While we don’t need to start planning benefit products that provide 142 years of benefits quite yet, the probability is high that our current portfolio will change significantly as we look forward, as will our generational messages to employees during enrollment.