CAMBRIDGE, UK – DECEMBER 9: Scientists are examining cells in a 96-well plate. These are… [+] The plates allow scientists to look at many cells at once and directly compare cells that have been treated with a drug with those that have not. Photograph taken at Cancer Research UK Cambridge Institute, Cambridge, UK, December 9, 2014. Cancer Research UK is the world’s leading cancer charity whose mission is to save lives through research. Their vision is to hasten the day when all cancers are cured. They have saved millions of lives by discovering new ways to prevent, diagnose and treat cancer, which has resulted in the UK survival rate doubling over the past 40 years. Cancer Research UK funds over 4,000 scientists, doctors and nurses across the UK, over 33,000 patients who take part in clinical trials every year, plus 40,000 volunteers who give their time to support research. (Photo: Dan Kitwood/Getty Images/Cancer Research UK)
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Forget luxury cars and beachfront real estate. The hottest obsession of the 21st century is time itself. Not just any time is good, but more time in life. From tech billionaires funding radical anti-aging research to ordinary people tracking their sleep and steps, the pursuit of a longer, healthier life has gone mainstream. It’s no longer just about extending your years, but rethinking what that extra time should look like. Scientists are pushing the boundaries of human biology, and financial experts are rushing to rewrite the rules of retirement. Even pop culture is getting in on the movement, with TV shows and social media influencers touting the latest longevity hacks. This isn’t how our grandparents thought we would age, it’s a full-blown longevity revolution, changing everything from how we work and save to how we eat and play. Welcome to the age of limitless possibilities, where living to 100 may become the new normal.
The new normal: Live longer, plan smarter
Life expectancy has been trending steadily upward for decades. According to the United Nations World Population Prospects report, life expectancy in the United States is projected to reach a staggering 89 years by 2100. While recent events such as the COVID-19 pandemic have caused temporary setbacks, the overall trend remains clear: we are living longer, and this demographic shift is creating both challenges and opportunities in the world of finance.
The Retirement Gaps: A $750,000 Annual Problem
Imagine a married couple with a $25 million investment portfolio split evenly between stocks and bonds. They want to spend $750,000 each year in retirement. If they plan to live to age 90, they’ll need about $19.5 million of their portfolio to cover this expense. This calculation takes into account an expected investment return of 7.04%, inflation of 2.5%, taxes, and possible market fluctuations.
Now, if that same couple planned to live longer, say to age 100, they would need more than $24 million of the original $25 million to maintain the same annual expenses — an additional $4.5 million just to survive an extra 10 years.
This example from JP Morgan shows how life expectancy can have a big impact on retirement planning: even for the wealthy, living longer means you’ll need to save significantly more to maintain the same lifestyle.
Source: https://privatebank.jpmorgan.com/nam/en/insights/markets-and-investing/ideas-and-insights/the-new-longevity-financial-planning-for-a-longer-life, for illustrative purposes only, JP Morgan Private Bank, as of April 1, 2024. … [+]
JPMorgan Private Bank
Trends shaping the longevity economy
1. The rise of longevity investing
Investors are seizing the potential of longevity-focused companies: In 2022 alone, approximately $5.2 billion was invested in businesses focused on extending human lifespan. This influx of capital is driving innovation in sectors like biotech, pharmaceuticals and health tech.
Median and Average Deal Size ($ Million) 2013-2022 Source:… [+] https://longevity.technology/investment/report/annual-longevity-investment-report/
Longevity Technology
2. Promise of anti-aging drugs
Drugs like Ozempic and Wegovy, originally developed for type 2 diabetes and obesity, have the potential to extend lifespan by reducing common conditions associated with aging, such as heart disease, sleep apnea, and Alzheimer’s. As these drugs evolve, they could revolutionize not only health care, but also retirement planning and long-term care.
3. Change in retirement date
Increased life expectancy is forcing a rethinking of traditional retirement ages. Many people are choosing to delay retirement not only out of financial necessity but also to remain engaged and productive in later years. This trend is reshaping workforce dynamics and creating new opportunities for “encore careers” and phased retirement plans.
4. The growing importance of long-term care planning
As people live longer, the likelihood of needing long-term care increases, driving demand for innovative insurance products and financial planning strategies to help them prepare for medical expenses in retirement.
Financial Strategies in the Age of Longevity 1. Utilizing Longevity Literacy
Financial advisors are increasingly emphasizing the importance of “longevity literacy” to help clients understand and plan for their chances of living well into their 90s and beyond, which involves assessing factors such as family history, lifestyle choices and access to healthcare to create more accurate, individualized financial projections.
2. Review your asset allocation
Traditional retirement portfolios may need to be adjusted to account for longer time horizons. This could mean maintaining a higher allocation to stocks even in later years to combat inflation and generate the returns needed to fund a retirement that could span decades.
3. Utilizing social security strategies
Postponing Social Security benefits until age 70 can significantly increase lifetime benefits for people who live into their late 80s or beyond. For a high-income couple who live to be 100, taking benefits at age 70 instead of full retirement age could increase their total assets by about $450,000 (in current dollars).
4. Consider a Roth IRA conversion
Roth IRA conversions are becoming an increasingly popular strategy for people who plan to live a long life, and although there are upfront costs, the long-term benefits of tax-free growth and no required minimum distributions can be significant, especially for those who live into their 90s or beyond.
5. Building in a guaranteed income stream
As the risk of running out of savings increases, products that offer guaranteed income for life, such as certain types of annuities, are gaining popularity and can provide a financial safety net for people worried about market volatility in retirement.
Opportunities in the Longevity Economy 1. Healthcare and Biotechnology
Companies focused on extending healthspan – the amount of time spent in good health – are poised for strong growth. This includes companies working on everything from gene therapy to personalized medicine to preventive health technologies.
2. Innovation in Financial Services
The need for new financial products aligned with increasing longevity is creating opportunities for innovative financial services companies. This could include new types of long-term care insurance, life-span-linked annuities, or investment products designed to provide a stable income over the long term.
3. Technology to help seniors live in their own homes
As more seniors choose to age in their own homes, there is a growing demand for technology that can help them live more independently – everything from smart home devices to telehealth platforms to robotic assistants.
4. Lifelong learning and skills development
As working lifespans increase, so does the need for continuing education and skills development, which creates opportunities for education technology companies and educational institutions that offer flexible, age-sensitive learning programs.
Future tasks
While the longevity revolution offers many opportunities, it also poses significant challenges.
Inflation risk: Even moderate inflation can significantly reduce purchasing power over longer periods in retirement. Financial strategies must take this long-term inflationary pressure into account. Healthcare costs: Healthcare cost inflation has consistently outpaced general inflation and can place a significant strain on retirement savings. Cognitive decline: Longer lifespans increase the risk of cognitive decline, highlighting the importance of early financial planning and the need for robust systems to protect vulnerable older adults from financial exploitation. Societal impacts: Longer lifespans exacerbate wealth inequalities, putting pressure on social safety nets and potentially leading to policy changes that could affect retirement planning.
The Road Ahead
As we stand on the brink of a longevity revolution, it is clear that traditional approaches to retirement planning and asset management must evolve. Financial advisors, policymakers, and individuals all must adapt to this new paradigm of increasing longevity.
For individuals, this means embracing lifelong learning, staying engaged in work and society, and adopting a more flexible mindset about retirement. For financial professionals, it requires developing new expertise in longevity planning and creating innovative solutions to help clients navigate this uncharted territory.
The Longevity Revolution is not just about extending our lives, it’s about breathing life into them. By understanding the trends, preparing for the challenges and seizing the opportunities, we can work towards a future where longer life spans are matched by greater economic security and happiness.
JP Morgan aptly puts it, “With proper planning, you can fill your potentially longer life with quality days that come in the form of health, comfort and financial abundance.” In this new era of increased longevity, financial planning is not just about preparing for retirement, it’s about creating the framework for a fulfilling, secure and potentially very long life.
