of decline set in motion by some unknowable
combination of heredity and environment whose outcome is xed by middle
age. This negative view of usual aging, sometimes called normal aging, is nei-
ther normal nor inevitable, wrote Dr. John Rowe, MD, President of Mount
Medical School (now President and CEO of Aetna, Inc.), and Dr. Robert
Kahn, PhD, Professor of Psychology and Public Health at the University of
Michigan. From a Health Span perspective, they argued, proactive changes
(interventions) can improve older-age health even when the new or modied
behaviors begin in midlife or old age.
8040_Cutler_ch01 1/14/02 9:11 AM Page 1 2 ADVISING THE MATURE CLIENT: FROM HEALTH SPAN TO WEALTH SPAN
The Health Span ideas became the framework for a decade-long series of
biomedical and psychosocial studies of aging and middle aging funded by the
MacArthur Foundation. The research included clinical, laboratory, and demo-
graphic studiesincluding the Swedish Twins Study to examine nature ver-
sus nurture as it applies to aging.
Across all this research, one unifying principle was demonstrated repeat-
edly: While what happens in earlier stages of the Health Span certainly affects
what comes later, interventions can have a positive impact on health even
when they come later in life. Five years after stopping cigarette smoking, your
chances of a heart attack are reduced to just about the same odds as a non-
smoker.
The Wealth Span Model: Health Span and Personal Finance
Two aspects of Health Spandevelopmental stages and the efcacy of later-
life interventionscaught the eye of Dr. Davis W. Gregg, then President-
Emeritus of The American College, home of the Chartered Life Underwriter
(CLU) life insurance designation. Texas born and Wharton educated, Dr.
Gregg had been with the College since 1949, president from 1954 to 1982. A
national leader in the education of nancial planners for over three decades,
including development of the Chartered Financial Consultant (ChFC) designa-
tion, he saw the parallels between nancial planning and Rowe and Kahns
Health Span. Thus, the Wealth Span conceptualizes the accumulation and ex-
penditure of wealth as stages in a lifelong developmental process but, of spe-
cial importance and relevance to older age, nancial interventions made even
later in life will have a positive impact on later-life nancial well-being.
Over the next few years, Dave Gregg and this writer ( joining him in Bryn
Mawr in 1989) developed the gerontological and nancial elements of the
model (see Chapter 13). Simply stated, the model says that the human Wealth
Span can be conceptually divided into two stages: the Accumulation Stage and
the Expenditure Stage. The goal is to accumulate enough wealth in the earlier
stage to have sufcient nancial well-being in the later stagein old age.
Like any analytic model (as discussed in Chapters 5 and 6), the primary
purpose of the Wealth Span model is not to scientically or accurately de-
scribe the details of aging and money, but to simplify and therefore to more
clearly reveal the developmental dynamics of wealth accumulation and expen-
ditures.
The Wealth Span Model as a Financial Advisory Tool
As developed in Advising Mature Clients, the Wealth Span model adds to the
tool kit of nancial advisors in three basic ways.
8040_Cutler_ch01 1/14/02 9:11 AM Page 2 Successful Aging 3
1. The model focuses on the components of the wealth accumulation and
expenditure processes as they relate to agingwhich is becoming in-
creasingly important for nancial professionals these days because the
very meaning of aging, middle age, and old age are changing.
2. While nancial advisors have substantial education and experience with
wealth creation and preservation, the Wealth Span model emphasizes
that in advising mature clients, a substantial part of the security in -
nancial security concerns the nancing of health care and long-term
care.
3. As a planning tool, the model can be used to illustrate to mature clients
how historical Wealth Span changes over the past 70 years have directly
affected both the responsibilities and the opportunities for nancial plan-
ning over the life span. Conversations with your client about his or her
own aging or the nancial implications of elderly parents are central as-
pects of the changing dynamics of accumulation, expenditures and, ulti-
mately, nancial security.
Two Fundamental Historical Changes
Two basic changes in the Wealth Span have taken place over the past several
decades: balance and complexity. The model can be used to show clients di-
rectly how these two sets of changes affect them personally. Chapter 5 dis-
cusses changes in balance, the number of years in the Accumulation Stage
compared to the number of years in the Expenditure Stage. We talk about
back then compared to nowadays because it is the broad historical trend
that is important, not any specic date or year.
Back then, the Accumulation Stage started earlier. Many people started to
work in their teens, and people accumulated until they retired, often in their
sixties. The traditional Social Security full-benets age of 65 is typically used
to mark the beginning of the Expenditure Stage, which was comparatively
shorter back then than it is now.
The relative balance in the number of years in the two stages has shifted.
Nowadays, the Accumulation Stage is shorter: It starts later (college, graduate
and professional school) and ends earlier due to early retirement. But the Ex-
penditure Stage is longer than it used to be due to earlier retirement and greater
longevity. In 1940, there was a 7% probability that a 65 year old would live to
age 90 or older; by 2000, this had tripled to a 26% chance (Chapter 2).
The bottom line of these historical changes in balance between the two
stages is that we now have fewer years to accumulate the resources that must
last for a longer period of time.
8040_Cutler_ch01 1/14/02 9:11 AM Page 3 4 ADVISING THE MATURE CLIENT: FROM HEALTH SPAN TO WEALTH SPAN
The story gets murkier. Chapter 6 describes the second historical change:
The Wealth Span has gotten a lot more complex. The stereotypical Ozzie and
Harriet familyhe works, she cooks and manages the home, and he retires at
65 with a guaranteed monthly dened benet pensionis not around very
much nowadays. Chapter 6 considers two general sets of complexities: nan-
cial and family.
New Financial Complexities
Nowadays, saving and investing are much more complex than before. Mutual
funds and online stock brokers make investing more available but also more
complex than ever before. The biggest new complexity, however, is the trans-
formation of the American pension system from dened benet to dened
contribution pensions. In essence, this change is seen in the answer to the sim-
ple question: Who is responsible for the future value of the pension that Im
now accumulating? Back then, the predominant answer was: They are. Nowa-
days, the answer increasingly is: I am.
Even the dening event of the move from the Accumulation Stage to the Ex-
penditure Stageretirementis no longer an event but can be a complex, mul-
tiyear process. The Wealth Span model uses the terms accumulation and expen-
diture because the meaning of and the distinction between work and retirement
have changed substantially over the years. A recent (2000) national survey con-
ducted by the National Council on the Aging found that only 54% of people
aged 65 to 75 were completely retired, 25% said they are both retired and
working full-time or part-time, and another 21% said they are not retired.
New Family Complexities
Complexities of a nancial nature include the fact that nowadays both spouses
are likely to be working. Chapter 6 refers to these families as DIPPIESDou-
ble Income, Plural Pensions. They are earning two incomes and simultane-
ously earning plural pensions (i.e., two Social Securities, two employer pen-
sions, and maybe two supplementary Individual Retirement Accounts [IRAs]).
It is very important to recognize that this does not mean that DIPPIES are
rich. They might be, but the essence of their situation is the complexity of their
wealth prole, not the size of their accounts.
A second new family complexity is the complexity of elderly parents. Mid-
dle-agers nowadays are much more likely to have elderly parents. As recently
as 1940, only half (52%) of 50 year olds had a living parent, increasing to
80% in 2000 (27% had both parents alive in 2000). It gets more interesting: In
1940, 13% of 60 year-old children had at least one parent alive. This number
more than tripled to 44% by 2000 (Chapter 4).
8040_Cutler_ch01 1/14/02 9:11 AM Page 4 Four Principles of Financial Gerontology 5
The Perspective of Financial Gerontology
Much of the background of the Wealth Span model and its development as a
tool in advising mature clients comes from the emerging academic eld of -
nancial gerontology. The essence of the research and education that would be-
come nancial gerontology started with the vision of Dr. Davis Gregg and his
lifelong friend Joseph Boettner. With a diploma and varsity football letter
from West Philadelphia High School and a CLU designation, Joe Boettner
worked his way up from life insurance salesman to corporate CEO. Over the
years he shared his wealth to educate others through endowments in the area
of life insurance education to Penn State University, Temple University, and
the American College.
In his eighties, Joe Boettner saw the need for something different, some-
thing broader that would serve the nancial