What Longer Living Means For Your Investment Strategy

When you set an investment strategy, you likely envision supporting yourself and your loved ones throughout for the entirety of life. But those lives you’re supporting are likely to extend longer than you’d imagined, as projections show Americans living an extra five years, from 77.1 years in 2022 to 82.3 years in 2052, according to a report from the Congressional Budget Office. 

While positive news, this increase brings with it significant implications for your investment strategy, affecting everything from your retirement budget to your asset class preferences. 

Does the Life Extension Difference Matter for My Family?

Why the increase in longevity, you might ask. While longer living is due in part to an increase in access to quality healthcare—something that had long been available to the ultra wealthy—it is also a product of improved health education and societal shifts toward an active lifestyle. Increased mindfulness about sleep, nutrition, and diet is helping us extend our time, and families with significant wealth arguably have the most access to body-optimizing memberships, equipment, and experts, so this change is likely to be reflected in your family.

Given your budget, the notion of living an extra five years doesn’t seem daunting. But at scale—if you’re supporting many relatives in a multi-generational family—then the uptick in time accruing quality-of-life costs while incurring healthcare expense and inflationary risk can reach a point where even you need to invest differently to outpace your costs.

It’s also not simply a matter of making it to that aforementioned figure of 82. Aging well beyond that is no longer wishful thinking, due to factors that combine genetics and lifestyle. A report from the Stanford Center on Longevity shows that a man who has already reached age 65 has a one-in-four chance of making it to age 92, while the United Nations projects a global population of 3.7 million centenarians by 2050—an eight-fold rise from 2015.

Ready to understand how life extension makes traditional investment strategies insufficient and recognize best practices for a changing world? Read on to ensure that you and your family have the security and strategy for the forthcoming fountain of youth.

Reassess Your Retirement Calendar

Increased longevity has ramifications on career and lifestyle, as the traditional retirement age of 65 now seems outdated. People will work longer into life, whether out of need to afford their lifestyle or because they have more time to find and fulfill purpose through vocation. 

The World Economic Forum estimates that the retirement savings gap—the disparity between what retirement savers need and what they have—in the world's six largest pension-saving economies will reach $400 trillion by 2050.

A “retirement savings gap” might sound like a worry for families with a smaller budget, but it concerns the high- and ultra-high-net-worth classes too, especially in large families, because you now need a bigger budget to sustain loved ones’ quality of life for an extended period of time.

The calculations on what couples of significant wealth spend in retirement can vary greatly, as lifestyles differ. One report we’ve encountered marks the average at $374,000 per year for retired couples of ultra high net worth, while another sets the number higher, at $860,000 per year. In any case, the amount needed stands to jump dramatically.

Extended life means more years in retirement—or at least phased retirement, because you may choose to work longer into your life while beginning to take more time for leisure. If you plan for your family wealth to support other relatives in their retirement, you can see very quickly how rising expenses can, at scale, impact quality of life—at least if you do not have an investment strategy that brings in returns to outpace these expenses. This is why you should look at directing your investment strategy toward high-yield classes, like alternative investments, which we will cover in this piece.

Another ramification of longevity is its potential to reshape the tie between retirement age and succession age. Just because you choose to work until, say, 80 doesn’t mean you want to wait that long before you task younger generations with managing the family business.

It’s a case for selecting a wealth management partner now, rather than at the crossroads of a liquidity event, you can at least begin to initiate conversations about what your long-term investment strategy will be.

Recalculate Healthcare Costs 

While increased longevity is a product of healthier lifestyles, it remains true that we will continue to rely on healthcare systems to uphold our good health. 

A rise in the global population and an increase in life expectancy combine to create scarcity in our healthcare resources. This means you need to not only plan for each of your family members affording healthcare for longer but also anticipate a rise in healthcare costs.

Even if you are positioned to not feel the effect of that leap of healthcare costs as it pertains to your immediate family, if you uphold a lifestyle for several relatives or want to leave generational wealth for many descendants, then it is a figure that, at scale, calls for an adjustment in your family’s projections.

As you set your investment strategy to reflect prolonged living, you may need to calculate and project these expenses into your budget if you plan for your family wealth to support a large family for several generations.

Plan for Longevity Disparity Among Loved Ones

When calculating longevity projections, experts are able to break down the likelihood percentages for a range of possible outcomes for a person based on the person’s age and health history. The  Stanford Center for Longevity, dissecting data from the Society of Actuaries, makes the following observation:

For example, according to the SOA longevity illustrator, a 65-year-old woman who doesn’t smoke and self-reports average health has a 50/50 chance of living at least another 23 years to age 88. But she also has a 25 percent chance—one out of four—of living another 26 years to age 91. One out of four is the odds of drawing a diamond out of a deck of cards.

On the other hand, the odds that this same woman will pass away before age 81, living 16 years or less after age 65, are also one out of four—the odds of drawing a club out of that deck of cards. The range between these two possible “one out of four” lifespans is 10 years, illustrating the uncertainty surrounding how long people might live.

The Stanford team observes that, for a married couple of 65-year-old non-smokers in relatively good health, there’s a 50-percent chance one of the spouses reaches age 92. Increased life expectancy won’t benefit each of us equally, so approach your investment strategy knowing your spouse or children could experience exceptionally long lives without your guidance.

This possibility informs not only how you invest but who you invest through. It is crucial that you find a wealth management team able to serve not just you as an individual client, but also your spouse, children, and grandchildren too, as a multi-generational client. You want a team that can report on investment accounts and opportunities in clear language, not jumbled jargon, and behave in the interests of your family.

Focus on Opportunities that Outpace the Market

The shift in life expectancy furthers our long-held ethos that your investment strategy should be assertive and growth-oriented in its outlook. Rather than seeing your wealth as a pool to diminish as slowly as possible, take on a portfolio that targets exponential gains.

Ultra-high-net-worth individuals are investing more than ever in assets that generate long-term income streams, according to a report by BlackRock. From real estate to private equity to infrastructure, these private opportunity investments provide returns that typically exceed the public class. In 2021 alone, the number of ultra-high-net-worth individuals rose 9.3 percent globally and 12.2 percent in the U.S., and the number is projected to jump another 28.3 percent by 2026, according to a Knight Frank report, so it’s increasingly important to separate yourself from a growing pack and get exclusive investment opportunities whenever possible.

By gravitating your portfolio toward more investments with high return potential, you make your family better able to generate wealth in ways that outpace the rate of inflation in years to come, putting your descendants in a better position to uphold your family’s legacy.

Mitigate Risks of Market Volatility

Longer living brings with it more years of market exposure. Facing a prolonged period of time when markets could dip or collapse, it is crucial that your investment strategy include alternative investments, like those mentioned above, to better insulate you from fluctuation.

Equities, bonds, and private opportunities vary in the extent to which they mimic the ebbs and flows of the public class, but a diversified mix of asset classes enhances protection for you and your family during seasons of market volatility. 

Maintain Flexibility for Your Changing Family

The more that any of us are around, the more likely we are to experience major events in our family structures, education plans, career paths, and so on. That’s why it is wise for any family to see their plans as  “living documents” that can be edited as needed. 

This affirms the value in having a wealth management team that can create sophisticated estate instruments and assist with family meetings, to respond to major events as your family experiences them—because we now have more time to go through those pivotal moments.

Additionally, you should value nimbleness and remain willing to adjust your investment strategy as needed, because a changing world combined with prolonged market exposure may necessitate shifts. In doing this, you want a wealth management team that can give you customized strategies and invite you into limited, timely private opportunities—not a team that will stuff you into one of a few silos for investment strategies.

With the potential that your golden years will extend into an entire golden era, now is the time to reassess your investment strategy to meet not only a changing set of circumstances for your family in particular but also a shifting reality for our society and economy.  

By planning for a longer lifespan, diversifying portfolios, gaining protection from market volatility, and remaining flexible, you can maintain a quality of life for you and your loved ones.