Q&A: How Does a Longer Life Expectancy Affect Your Investments?

Q&A: How Does a Longer Life Expectancy Affect Your Investments?

Question: I’ve heard you talk about medical technologies that might allow people to live longer. I assume that the prospect of living to 120 doesn’t refer to people who are retiring today or next year, but only to much younger people, correct? And how might a longer life expectancy impact investment strategy?

Ric: Actually, I think it’s quite possible that developing technologies will benefit people who are already in or near retirement. If you’re 65, it’s likely that medical innovation in 30 years could reset your physiological age back to 65 — even though your biological age will be 95.

Ray Kurzweil said it best. One of the world’s leading futurists, he’s currently director of engineering at Google, is on the Harvard faculty and owns hundreds of patents. He believes anyone living today who can make it another 40 years just might live forever.

That’s a bit of an extreme view, but he’s not alone. I’ve met medical researchers at Singularity University (I graduated from its executive program in 2012) who argue that advances in nanotechnology, biotechnology, medicine and neuroscience will radically affect aging. A growing consensus holds that aging is a disease that can be treated — slowed, stopped, even reversed — with medical intervention.

No wonder many believe infants born today in the United States are likely to have a life expectancy of 120.

Even today, according to the Social Security Administration, one in four 65-year-olds will live beyond age 90. The Department of Labor says one in two will live to 95. Actuarial data currently show life expectancies of 88 for women and 86 for men, and those are backward looks. If you look forward through the eyes of medical technology, it’s quite reasonable to assume that by the time you are 90 there will be new treatments and therapies to extend your life to 100, and when you reach 100 they’ll figure out something that will keep you going to 110, 120, etc.

There are others who postulate that, eventually, people will live to age 150 or 200 or longer. We’ll have to wait and see how that turns out, but my point is you should assume that with good health you’ll live much longer than you probably thought.

That frightens some people because they look backward at their grandparents’ version of old age. They envision Whistler’s Mother — and that’s not the kind of future any of us wants.

But what if at age 95 you had the physiology of a 50-year-old? Then being 95 wouldn’t be so bad. And that’s exactly where medical science is headed — toward improving the quality of life.

This evolution is underway. Got a bum knee? Just replace it. Need a new kidney? No problem. New heart or lungs? A new hip? Done. Surgeons are performing face transplants, and the first uterine transplant was performed recently. 3-D printing will make it easy to create the body parts you need, and genetics technology, using the inexpensive, easy-to-use system CRISPR, will let doctors remove dangerous genes from your body at the molecular level.

So don’t assume that aging chronologically means you will age at the same rate biologically.

But what of the economics of living to age 110 or 120? As I predicted in The Truth About Money, written 20 years ago, retirement was a 20th century innovation and won’t exist in the 21st century.

After all, retiring at 65 and living 60 years without producing an income is not a viable financial strategy for most people.

So instead of retiring at 65, you’ll earn money longer. But don’t worry. Your extended work life won’t be drudgery. It will be fun and exciting. Instead of doing a job you hate, you’ll engage in lifelong learning to attain knowledge and skills you need so you can do things you enjoy — and you’ll be paid to do it. You’ll work part time, in hours and locations of your choosing, and you’ll take lots of sabbaticals before starting something new. And all this will provide you with decades of additional compound growth for your investments. Instead of investing for 20 or 30 years like most people do now, you’ll grow money for 50 or 60 years. The impact on your wealth will be astonishing.

Here’s a simple illustration. If you invest $5,000 today for 20 years at 7%, you’ll end up with about $20,000. After 65 years, you’ll have $400,000. After 100 years, you’ll have $4.3 million — and that’s the point. If you can grow money for eight or 10 decades, you’ll be amazed how much wealth you can create, wealth that will easily support the lifestyle you want, thanks to the vim and vigor you will have because of medical technology.

We’re excited about these developments. We expect them to change the nature of the advice we provide our clients. In fact, we’ve already begun shifting our investment strategies for them. Last year, we introduced exponential technologies as a theme within most of our client portfolios, to provide investment exposure to these technologies. We believe this will become increasingly important over the next decade and beyond.

We are also re-evaluating the advice we give for college, long-term care and housing, and we are developing advisory services for brand-new areas, such as career counseling for our clients.

So fasten your seat belt. Exponential technologies will create a bright and exciting future, changing virtually every aspect of our lives.

As Yogi Berra said, the future ain’t what it used to be.

Originally published in Inside Personal Finance June 2016

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