Investing for a Long Lifespan
Biotechnology startups are developing medicines that may greatly prolong the human lifespan. If their scientists find treatments that work and these treatments survive their FDA trials, patients who use them may live longer lives. One anti-aging startup in this field is Unity Biotechnology. Extending human lifespans could disrupt several segments of the financial industry. It’s normal for workers to plan to retire in their 60s, and financial instruments are often designed with this goal in mind. But longer-lived workers that retired later might make different choices.
In retirement, the retiree often receives both a pension from the government and an income from personally owned investments. These sources of income should be considered separately. Governments around the world are already raising the age when a citizen qualifies for a pension. This is partially because average life spans are rising, but it’s also a way for governments to save money. If anti-aging treatments became more widespread, the minimum age requirement to collect pension payments could rise further.
In the United States, you receive Social Security retirement benefits based on your age at retirement. For citizens born after 1960, you receive 70 percent of the payments if you retire at age 62. But you receive 100 percent of the payments if you retire at 67. If you’re unhealthy and expect to die in your 70s, you might have to think about this trade-off. But if you expect to live a very long lifespan due to anti-aging treatments, waiting until age 67 will be a more appealing choice.
As for private investments, wealth managers often include a client’s age when they calculate the acceptable risk level for a portfolio. The idea is that it’s easier for a younger worker to recover from setbacks such as stock market crashes. If the worker has to pull money out of the account when stock prices are low, the worker can add more money later. But an older worker who’s close to retirement might not have time to wait for stock prices to climb back up.
As a result, wealth managers often include more stocks in portfolios for younger workers, gradually increasing the percentage of bonds as the worker grows older. There are even target date retirement funds that perform the adjustment automatically. Vanguard is one of the wealth management firms that sells target date retirement funds. And the planners who created these funds estimate that buyers will retire at 65, a reasonable assumption. But if anti-aging drugs become available, a worker who expects to retire later might want to pick a fund with a later target date.
Longevity insurance could be very appealing for people who take anti-aging drugs. A longevity insurance policy is a special type of annuity. It’s designed to pay your bills if you live longer than you planned and your other sources of retirement savings run out. Individual and commercial longevity insurance policies are available. Commercial policies protect companies against the risk of making pension payments to former employees who live longer than expected. That’s a significant risk in a world where startups are developing anti-aging drugs.
An individual longevity insurance policy might only start paying you when you turn 85. But because many people don’t live this long, the payout rates can be much higher than the payout rates for typical annuities. At Forbes, Wade Pfau explains how longevity insurance could have a 30.82 percent payout rate. So if the policy holder needs a specific level of income to pay bills, the longevity insurance policy would cost much less than a regular annuity. But the huge payoff only occurs if the policy holder lives to age 85. If the policy holder dies before that age, the heirs don’t receive anything.
Anti-aging startups and longevity drug makers could change your retirement plans if they succeed. You might want to reconsider your retirement strategy if you decide to retire later, or even if you plan to continue working. Government and corporate pension managers have already put plans in place to prepare for a world where some people live longer lifespans than they expect.