Most Canadians are failing to factor longer life spans into their retirement plans, and advisors have an important role to play in prompting them to plan for this increasingly relevant risk, according to Michael Banham, vice president of wealth distribution at Sun Life Global Investments.

At the Canadian Institute of Financial Planners (CIFPs) Annual National Conference in Halifax on Monday, Banham explained that average life expectancy for a Canadian woman at age 65 has risen to 87 from 84 in 1979; and for a man, it has risen to 84 from 80 over the same period. In addition, he said the number of centenarians in Canada is poised to surge to 80,000 by 2061, from 5,825 in 2011.

“Canadians are living longer and healthier lives,” Banham said.

However, Canadians do not appear to be prepared for this reality. Banham pointed to a recent survey by Sun Life, which showed that a majority of Canadians between the ages of 55 and 72 expect that they will only live to age 80.

“They don’t appreciate how much longer they’re going to live,” he said, “and they need to be able to plan for it from a retirement perspective.”

Planning is critical, Banham said, because the prospect of living longer presents a variety of additional risks that clients must consider as they approach retirement. This includes the most obvious risk: that clients could run out of money before they die.

“If you’re going to live 30 or 40 years in retirement, obviously longevity is an issue,” he said.

Health care costs also present a key risk as Canadians live longer. Banham pointed to statistics showing that for a couple at age 65, there is a 71% chance that one of the individuals will experience a critical illness, and an 82% chance that one of the individuals will eventually require long-term care. Despite these odds, only 19% of Canadians have put money aside specifically for health expenses in retirement.

“People don’t appreciate that these things are going to happen,” Banham said. “It’s our job to make sure that they do, and it’s our job to work together to address them.”

In addition to health and longevity risks, a longer retirement also means clients are more inclined to take on more investment risk over a longer period of time, amid the pressure to accumulate a sufficient nest egg for their retirement. This means portfolios are likely to be subject to market risk and volatility over a longer period of time.

“There’s a possibility of you living through three or four recessions in retirement,” Banham said.

Advisors have a responsibility to bring all of these risks to clients’ attention, and help them plan accordingly, Banham said. “We need to work together to get that message out,” he said.