In the following blog, we’ll discuss how to invest now so we are prepared to live well in a disruptive future that has the potential to extend our lifespans far greater to what we’ve ever planned for. If you’re worried about having enough money put away when you’re 65, you better start thinking about having enough when you’re 85, 95, or even 105. Death from aging is a technical problem and millions of dollars are being allocated to research to find a technical solution. Continue reading to learn how to better prepare to not just have enough to get by when “100 is the new 60”, but to thrive and take advantage of an exponentially exciting future.
The average US life expectancy has risen from 47 to 79 since 1900. While it be true that these gains come largely from a lower infant mortality rate, we’ve also made substantial longevity gains in later years thanks to a better understanding of why we age. Although there are many factors that cause aging, scientists are constantly understanding more about those reasons and have begun experimenting with remedies. The idea here is that instead of treating individual diseases such as Alzheimer’s, cardiovascular disease, and cancer, scientists are pursing the new approach that tackles the key risk factor in all major diseases: age.
If it is possible to make 100 the new 60, as companies like Human Longevity, Inc. plan to do, the impacts and changes to our society, culture, and lifestyle will be monumental and widespread. It’d be nearly impossible for me to consider all implications in a single blog so let’s focus on one important concept – your financial well-being.
How do we ensure we have enough money to last us an additional 30-40 years?
Will social security still kick in when you hit 65?
Will we be forced to work at 80?
These are all daunting questions. If you want peace of mind now that you will be set and well off in the future, there is only one investment tip you truly need to master and take advantage of:
Consider the following scenario from the book Money:
There are twin brothers named Will and James. When Will was 20 years old, he opened a retirement account and put $4,000 in the account every year until he was 40. From 40-65, Will did not contribute any more money to the account and just let it grow at a 10% return.
His brother James got off to a later start – he opened his retirement account at 40, put $4,000 in each year until he was 65 (also with a 10% return).
The end result? By the time they both hit 65, Will had $2.5 Million while James only had $400,000.
So what made the difference? Time and compound interest.
So how can you get time and compound interest on your side?
There are of course environmental factors that contribute to how long you live and if you’ll be able to reach the “Longevity Escape Velocity” such as diet, exercise, stress, and sleep; however more and more scientists are beginning to accept aging as an illness that can be treated. Aubrey de Grey has been researching this very thought for over a decade now and believes that “The first human to live to be 1,000 is probably already alive today”. A previous blog, Why Your Health Will Soon Be Your Most Valuable Commodity, touches more on this possibility. However, as much as medical breakthroughs will grant you more time, saving money and taking advantage of compound interest is up to you.
Lets consider the scenario where 100 is the new 60, meaning we’d have the same physical and mental agility as people do now at 60 when we hit 100. I’m currently 26 years old. If I started off with just $10,000 and contributed $5,000 every year until I hit 100, I would have accumulated $13,741,427.38 (assuming a 7% interest rate).
A disheartening fact, though, is that 70% of Americans have less than $1,000 in savings. Although no one can guarantee commercial space flights to Mars, real jet-pack rides, or even some form of immortality, you can be sure that you’ll need more than $1,000 to take advantage of the excitement that the future will have to offer (especially when machines take our jobs).
How to save enough to take advantage of the future
I’m going to defer suggesting any specific investment strategies and share insights from an actual professional in this field (see below). However, I’ll get us started and will share two sound strategies to exploit the power of compound interest.
The first is a portfolio that has a heavy concentration on Low-Cost Index Funds. Low-Cost Index Funds are funds such as the S&P 500 that simply mimic the market. Initially, you might be weary of this technique because we constantly hear about and fear market crashes. However, if you are investing in the future and want to use time as fuel for your money-growing machine, you need to trust that the market continues to grow over time (and is even set for exponential growth as future technologies radically maximize productivity). The picture below represents the effect technological improvements has had on the World GDP.
You should also avoid Mutual Funds, as 96% of them fail to beat the market and you will pay more in fees. From 1993 – 2013, the S&P 500 returned an average return of 9.28% while the average mutual fund returned 2.54%.
The second (and more proactive) tip is to stay up-to-date on the developing technologies that are set to positively impact the world in huge ways. Things like Networks, Sensors, Robotics, 3-D Printing, Synthetic Biology, Virtual and Augmented Realities, and Artificial Intelligence are becoming faster, cheaper, and more powerful. Although they are all set to make unexpected and impactful changes, it is still difficult to predict which specific companies will take over.
For this approach, it is best to align with a Fiduciary such as Josh Basen, VP of Wealth Management at UBS, who was able to share his insights about investing in the future. Josh works with foundations and endowments whose investment portfolio is expected to exist in perpetuity (aka: forever).
“Those organizations plan to provide resources for both today’s needs and many generations that come after them. To do this they have to be crystal clear about their return, inflation, saving, and spending expectations.”
“Using this info,” Josh continued, “clients look for investment themes that may take several years to play out but should end up shaping the global economy. Themes like automation and robotics, e-commerce, medical advancements, cancer therapeutics, clean air and carbon reduction, waste management, etc. There are investment products that target these concepts and do so by investing in companies that are changing the game in those fields. This longer term focus might not result in top flight returns today but should give clients the best chance of catching the next Google, Apple or Amazon before it hits its stride.”
“For example, if you bought Amazon at $10 a share 15 years ago and had the patience to stick with them, today you would be very happy to own that at $1008 per share.”
“In simple terms, in order to invest forever:
- Set expectations for growth and spending and build a portfolio around those expectations
- Identify investments in industries/geographies that are poised to boom long term, even if the world hasn’t yet recognized it
- Be patient and consistent with your strategy”
The future will experience many disruptions and changes during the next several decades. In order to protect yourself from the shifts we’ll experience in our societies, cultures, governments and economies, we need to proactively take steps today to be able to thrive and live well in the future.