Should We Plan on Living Beyond Age 100?
“Longevity Risk” and Retirement Revisited
If we could know how long we will live, it would make it much easier to plan our financial future. But that wish will likely never come true. While average life spans continue to rise, we really can never know how long any one person will live.
When if comes to planning for “financial independence”, a key to knowing for sure we have enough money is knowing how long it will have to last. So therein lies the conundrum; a key variable to knowing if we are financially independent is essentially unknowable! Well, that is just the way it is. So people planning for retirement and also retirement planners (like me) must deal in the realm of probabilities – not certainties.
In the retirement planning world, we generally try to get to a 90% or higher probability that our client will not run out of money – given a set of realistic and conservative assumptions. In my mind, one of the key problems currently in “retirement planning” is that the vast majority of planners, when providing retirement analysis and advice, assume life expectancy of age 90 or 95.
What if this assumption turns out to be off by 5 years? Well, no big deal. The plan would probably still work as we were using a 90% or higher probability. But wait! What if the life span assumption is short by several decades? Well, there we have a problem. Not only is it much more likely our savings would run out (before we do), but also the pensions that form part of our income would come under incredible stress – with cuts quite likely. This, by the way, is why I believe we will need to stay healthy and find a 2nd or 3rd chapter in our livelihood story.
A key theme I write about in RetirementSingularity.com is the idea that we are, I believe, not too far away from being able to extend human healthy life spans well beyond age 120. At the same time, an important unknown is when this will become an accessible and practical reality. My best guess is that the science that will enable this will start showing up within 15 – 20 years. While the accessibility for you and I may take a few years longer. Since this is not that far away, and is potentially within your life expectancy, don’t you think it should be something you pay attention to? Well, that question is exactly what prompted me to start www.RetirementSingularity.com – an exploration of the implications of healthy life extension (and technological disruption), and what we should do about it now.
Since there is uncertainty around the timing of medical breakthroughs that will enable healthy life extension, I regularly spend time every week to staying up to date on what is happening in this world. This is easier said than done, as the enabling research and technologies could come from many different geographic areas, research disciplines and industries. Hey, even Google has entered the fray.
One interesting initiative I came across recently is the Palo Alto Longevity Prize. Here is how this organization describes itself;
The Palo Alto Longevity Prize (the “Prize”) is a $1 million life science competition dedicated to ending aging. Ours is one of a growing number of initiatives around the world pursuing this goal—the more shots on goal the better. Through an incentive prize, our specific aim is to nurture innovations that end aging by restoring the body’s homeostatic capacity and promoting the extension of a sustained and healthy lifespan.
Peter Diamandis, developer of the X-Prize and author of the excellent book Abundance, has popularized the idea that offering a monetary prize can energize participation and effort towards the end-prize. Along the way, there is an increase in awareness and collaboration. All this activity and focus creates an environment where the end result happens sooner than it otherwise might. The Palo Alto Longevity Prize is a recent example of this concept devoted toward “hacking the aging code”. Many teams have already taken up the challenge and I look forward to following their progress!
The intro video to their site is worth checking out here;
Live long, live well, and prosper!
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Photo Credit; from Palo Alto Longevity Prize website; http://paloaltoprize.com/wp-content/uploads/2014/09/102909_seniorshiking.jpg