A decade ago I wrote about investing for 100-year olds. I wondered how we should work, save, invest – even have children or time our retirements – given ever-rising longevity?

If kids born in the developed world in the early years of 21st Century could expect to see the 22nd, what would that do for their investment time horizon?

Interesting questions – but my article proved to be a masterly example of the perils of market timing.

A few years later UK life expectancy actually fell!

Talk about being suckered in at the top.

Pundits dutifully penned gloomy pieces bemoaning how younger Britons would not live as long lives as their elders. But actually, it’s not quite so clear.

Full Fact reports UK life expectancy has stalled, not fallen:

According to the ONS: “Life expectancy at birth in the UK did not improve in 2015 to 2017 and remained at 79.2 years for males and 82.9 years for females.”

If you look at the trend over time in those figures, both male and female life expectancies rose slowly until about 2014, and they haven’t discernibly changed since.

On the other hand, the UK pension industry cut life expectancy forecasts by six months in 2019.

Some researchers such as those at The King’s Fund expect Covid-19 to further depress longevity forecasts:

The scale of excess mortality associated with Covid-19 thus far, and evidence that many lives have been cut short (for example almost 11% of Covid-19 deaths were among people aged under 65 years), is unprecedented in recent decades.

The wider socio-economic impacts of the pandemic could also have an adverse impact on health and mortality overall.

They state the influence that the pandemic will have on life expectancy in 2020 will become clear in due course.

Oh, joy.

What the Dickens?

Even leaving aside the recent choppiness in the prognosis for longevity, it’s clear that in the UK the most dramatic advances happened long ago.

To quote those same researchers:

Males born in 1841 could expect to live to only 40.2 years and females to 42.2 years, mainly because of high mortality rates in infancy and childhood.

Improvements in nutrition, hygiene, housing, sanitation, control of infectious diseases and other public health measures reduced mortality rates, increasing life expectancy to 55 years for males and 59 years for females by 1920.

That’s a big leap by the early 20th Century. Compare though the 1841 figures with life expectancy in the year 2000. By then newly-born girls could expect to live until their 80s, and men hope to see their late 70s.

That means life expectancy almost doubled!

Perhaps it’s no surprise if there’s some frustration with this century’s more erratic advances:

Looking at this graph, you might infer that life expectancy advances have slowed to a crawl. ¹

However it’s not as if there’s been no progress. (I’m sure most people who got an extra three years wouldn’t have wanted to give them back…)

It’s also worth noting that life expectancy is increasingly stratified between different social groups.

Socially-deprived male smokers in ex-industrial towns who haven’t worked for two decades could indeed (unfortunately) be seeing their life expectancy fall.

But clued-up Monevator readers with the wherewithal to gaze ahead 40 years and to save towards it – keeping fit en-route – probably have more to look forward to.

Want more? My co-blogger The Accumulator wrote a great post on how to think about your personal life expectancy (and another one for couples).

Tweak your financial plan(s) accordingly.

Who wants to live forever?

What if the big advances in life expectancy aren’t over? Not just in terms of how long you live – but how long you will stay healthy?

Imagine if you lived until your 150th birthday, and you were still very active at 140.

What would that do to how you work, save, spend, and invest?

Another 50% or more added to our life expectancy sounds like science fiction. Currently it is science fiction…

…unless you’re a yeast cell, a modified mouse, or even a primate that has taken part in one of the various longevity research projects making waves around the world.

In that case certain supplements, eating protocols, and gene-related therapies may have already increased your lifespan by 20-50%.

My interest in this was piqued by my girlfriend, who told me on our first date that she planned to live until 150.

“Go on a few more dates with me and it’ll certainly feel that way,” I said.

Morbid banter aside, she also pointed me towards the work of Harvard Medical School biologist David Sinclair and his 2019 book Lifespan.

Sinclair believes we should treat aging as a disease to be cured, rather than an immutable law of nature.

In Lifespan he introduces the ‘information theory of ageing’. The idea is that instability in an organism – grey hair, wrinkly skin, cancer, ageing – amasses over time due to the loss of the organism’s ability to repair genetic damage.

From Wikipedia:

The authors begin by seeking to characterize how professionals view the hallmarks of aging, including genomic instability caused by DNA damage; alterations to the epigenome that controls which genes are turned on and off; loss of healthy protein maintenance, known as proteostasis; exhaustion of stem cells; and the production of inflammatory molecules.

“Address one of these, and you can slow down aging,” the authors argue.

“Address all of them, and you might not age.”

I was skeptical when I began the book. Sinclair is a persuasive evangelist, and he largely won me over. I was already an intermittent faster and a firm believer in exercise, as I shared on Monevator years ago. I’m now looking into other anti-ageing hacks cited by Sinclair, such as resveratrol and metformin.

I already think we’re at the start of a transition towards self-directed health – soon to be better informed by genetic testing – that will further widen the gap between the healthy and unhealthy.

For instance, I subscribe to the home blood testing service Thriva. It helped me to get my cholesterol down without resorting to the statins that doctors were pushing towards me:

Source: Thriva

I suspect cholesterol isn’t the whole story when it comes to heart disease. But I also believe the actions I took to lower it – dietary changes, and further reducing body fat – will lead to a healthier life. I used cholesterol as a marker.

Thriva tracks cholesterol and many other metrics in one place, making it very easy to monitor. Consider giving it a go. (That’s an affiliate link incidentally. Sign-up via it and we both get £10 off our next Thriva test.)

Monitoring today takes a pinprick blood test. It won’t be too long though until most parameters can be measured in real-time by wearables or implants.

FIRE for centenarians

What all this means for planning for retirement is anyone’s guess.

Your first move might be to massively inflate the numbers you pop into your nearest retirement calculator.

Perhaps age-reversing treatments might enable you to retire fairly healthy at 85 and then to live for another 50-70 years?

You might fear this will strain your withdrawal rate calculations to the limit – until you remember you’ll also have another 20 years of working and earning for your nest egg to compound before you need to touch it!

Though we can obviously assume the state retirement age will have risen above – ahem – 67 in a live-to-150 world.

Which is a clue to the real elephant in the room. Our economies are just not ready for lots of human beings to routinely live well beyond 100.

I’d imagine every annuity-providing life assurance company would go bust tomorrow if some protege of Sinclair’s announced a surefire way to give retirees an additional 30 years of extra life expectancy.

As for all those companies who still have legions of final salary pension claimants on their books…

Right now the world looks gloomy. Domestic politics is dire, the earth is on fire, a new Cold War between the US and China looms – oh, and there’s a pandemic raging. It’s easier to imagine lives getting shorter than longer.

The history of progress since the start of the scientific era tells us we should hedge our bets.

I still don’t expect to live to 150, or anything like it.

But I wouldn’t rule it out!

1. It’s tempting to do a spurious correlation with similarly flattish interest rates. Hedge funds have been marketed on less.[↩]

What caught my eye this week.

Most people have given up on a V-shaped recovery. The concept of a U-shaped one is positively passé.

As for the Swoosh – please!

Nope, the latest red hot letter to explain the state we’re in comes with the K-shaped recovery.

As Barry Ritholz rather reluctantly explained this week:

If you were to describe the 11th letter in the English alphabet to someone who has never seen it, you would note that it is distinguished by a bold vertical line, from the midpoint of which begins two rightward traversing lines, one slanting 45 degrees upward from the horizontal, and the other 45 degrees downward.

This description of the economy fairly captures the two separate paths of the recovery.

The line heading upward symbolizes those parts of the economy that have benefited from pandemic […]

The line heading downward symbolizes, well, pretty much everyone else.

Here’s an illustration from the US Chamber of Commerce:

Source: US Chamber of Commerce

Does it apply to us, too?

Many Monevator readers are richer than they were in January. We’ve retained our jobs, spent less due to being locked-in, and may also have seen our US-heavy portfolios rise, especially if we’ve some bonds and gold, too.

At the same time, other Britons caught in the wrong place when the music stopped – particularly those who fell outside of the safety nets, such as directors of the wrong limited companies – have been hit hard.

Ritholz sees the K-recovery as a continuation of wider trends:

Over the past four decades, the U.S. has become a nation that has seen the benefits of economic growth, productivity and innovation accruing to fewer and fewer people.

Once a nation of ‘Haves’ and ‘Have Nots’, we are now a nation of ‘Haves’, ‘Have Nots’, and Have Much More’.

The last category has left the first two in the dust.

Here’s an example of the K-shaped recovery applied to the US workforce by The Washington Post, cited by econlife:

OK Computer (says no)

Here in the UK I’d say we’ve only seen the ghost of a K-shaped recovery so far.

Government support and the generous furlough scheme curbed – or at least delayed – the lived impact of the UK’s brutal GDP collapse.

While we have plenty of rich individuals who are doing alright, sector wise we don’t have a vast tech industry that can benefit from the upper leg of the K. At the same time, the Eat Out to Help Out scheme may have helped the K’s lower leg look kinkier for the hospitality sector.

Not wildly convincing.

Ultimately the letter K will probably prove about as useful as the letters that preceded it in predicting what will happen next.

Which, to my mind, is not very useful at all!

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What caught my eye this week.

Remember Child Trust Funds, the more generous precursor of the Junior ISA?

I wouldn’t blame you for forgetting. Those halcyon days of 2005 when Gordon Brown felt able to hand the parents of three-year old children £500 towards their future almost feels like science-fiction now, post the financial crisis, post-austerity, post-Brexit, and mid-pandemic.

Nevertheless hand parents £500 to tax efficiently invest for their kids Brown did. And with the first Child Trust Fund (CTF) recipients turning 18 this year, next month will see small fortunes unlocked across the land.

Indeed the investment platform EQi says that while its average client’s CTF balance is £6,500, a few lucky mini-moguls are sitting on CTFs worth £200,000!

Parents could have topped up that initial £500 from the government with a massive £55,000 over the years, and presumably some did to generate these six-figure fortunes.

Either that or we have some new mini-Buffetts coming up…

The kids are alright

The average account is of course much smaller – there are an estimated 6.3 million CTFs in existence, holding perhaps £6bn in total. Of these EQi reckons 420,000 are about to mature, which sees the kids gain control of the purse strings.

No doubt second hand car salesmen, guitar vendors, nail salon owners, and lululemon store managers are all licking their lips at an imminent windfall.

But it’s worth stressing to any suddenly-minted teens within earshot that you don’t need to spend the money just because you’re 18.

A CTF automatically becomes a standard tax-free ISA at 18. And unless they’re spending the money on a house deposit or perhaps on education, that’s what most should do. Young people are already plenty rich without throwing money at them.

Maybe sit them in front of a compound interest calculator? Even EQi’s middling £6,500 balance could be worth over a quarter of a million pounds by the time a child reaches 65 – if left to compound tax-free with an assumed growth rate of 8%.

A kid with £25,000 or so in their CTF could in theory have a shot at becoming a (nominal) millionaire pensioner without saving another penny!

Of course, kids are kids. Heck, many adults are kids. Most of the money – an estimated £2.4bn this year alone, according to EQi – will probably be spent without too much soul searching.

But if you are blessed with a child who will read the Financial Times with you ¹, then do peruse its take on how to deal with this good problem to have. At the least, as the article warns, don’t even think about protecting little Jonny or Jemima from themselves:

For any parents thinking of not telling their children about their investment pot, Tim Stovold, head of tax at Moore Kingston Smith, notes:

“Parents planning not to pass on the good news until their teenagers hit the sensible years should be aware that HMRC has provided a tool to allow children to check whether a nest egg awaits them — even if their parents don’t tell them.”

Have a great (wet and chilly) bank holiday weekend.

Are your kids (or you) in the money on the back of a maturing CTF? Share your plans for the loot in the comments below.

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1. Congratulations! You’ve unlocked the Monevator Gold Star Parenting award.[↩]