Saturday, November 18th, 2017

You might have a really long investment time horizon

Many clients will know of my interest in life expectancy and its implications for retirement income planning.  For many years I have taught an adult education class titled “What If I Live To Be 100″ and this helps keep me up to date on changes in this area.

The November 2013 edition of The Atlantic magazine featured a graph showing the increase of American life expectancy from 1800 until today, and placed on it dots to indicate major medical breakthroughs.  The most recent breakthrough they identified was a bioengineered kidney successfully transplanted into a rat in 2012.  The chart shows that life expectancy has doubled since the advent of the industrial revolution and I believe the digital information revolution has just begun to be leveraged in the medical sciences field – who knows what fantastic advances will occur if only researchers are free enough to continue innovating?

age

This leads me to the fact that the average Canadian couple that retires at about age 63 and is in good health not only should be planning to live another 20-25 years just based on average statistics, but that this number is steadily increasing.  My own grandmother was born at the start of the 20th century when life expectancy was about 50 yet lived to be 98, despite smoking for many decades.

When it comes to planning for a margin of safety in retirement income planning it is best to err on the high side and to be prepared to live to 100!  This means you need investments that can generate a rising income for the remaining decades of your life, and as you will know from my other writings and from direct discussion, the asset class that does this like no other asset class can is stocks/equities/businesses/companies, four ways of describing similar things.

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