Aug 27, 2019 Equities

The longer you live, the more money you’ll need!

Live 1,000 years? That’s certainly possible, scientists say. But what does that mean? Among other things, that your savings have to last a lot longer.

  • Human life expectancy has been steadily increasing and will continue to increase.
  • Government retirement systems cannot keep pace with this development.
  • That’s why it’s important to get started as soon as possible on a private retirement plan that generates high returns.
Reading time: 3 minutes

“No one has ever done it,” Aubrey de Grey says. The British researcher with the long beard has been investigating the process of human aging: “By the time I was in my late-twenties, I thought it would be obvious to everybody that this is the most important issue in the world and that a lot of clever scientists would be working on it.” But that was not the case in the 1990s – so de Grey founded the SENS Research Foundation to get to the bottom of the topic. His theory: It will be possible to live to be 1,000 someday.[1] For him, a human being is nothing but a machine with a lot of moving parts. Wear and tear can be slowed or even reversed – according to de Grey all you need is the necessary microbiological expertise.

20

In 2017 the average number of years that retirement benefits were drawn in germany was 20 years.

Aubrey de Grey

Gerontologist

1,000 years – certainly a very bold challenge. But other scientists are also now investigating how long people can live. The unanimous answer: 125 or even 140 years will be no problem in the near future.[2] After all, life expectancy has been going up worldwide for years, as World Bank data shows.[3] In the year 2000, the average was 67 years. By 2017, it had already gone up to 72 years. This has consequences, also for social security systems. One example: In 1997, the average German drew retirement benefits for just under 16 years. Now it’s about 20 years.[4] That’s four more years that have to be financed. Researchers have estimated that in 2050 the eight largest state-run retirement systems in the world will have a pension gap of around 400 trillion dollars.[5] That’s about 359 trillion euros at current exchange rates.

400

The 8 largest state-run pension systems in the world will have an overall pension gap of 400 trillion Dollar.

Let two allies work for you

For this reason, private retirement plans have to be able to cover a retirement phase that is continually getting longer and longer. Impossible? No, because you have two powerful allies – the stock market and time. The stock market because, over the long term, stocks provide the highest returns compared to other forms of investment. For example, the German DAX returned more than 8 percent annually on average between 2008 and 2018.[6] And time? Time ensures that the effect of loss-making periods, which always have to be part of the calculation when investing in stocks, is reduced. Because over a long-time horizon, chances are good that losses can be made up.


Live longer, save more

Younger people are going to have to save more than their parents to make up for the coverage gap when they retire – simply because they will be living longer. The German Insurance Association (GDV) estimates that someone born in 1975 will have to have saved 83,000 euros (measured in today’s euros) to cover 22 years of retirement.[7] For someone born in 1990, that amount is 117,000 euros – almost 30 percent more although statistically that person’s life expectancy is only two years more.

How much higher is the life expectancy of a male born in 2000 compared to a male born in 1960 in germany?

Source: Bundesinstitut für Bevölkerungsforschung, https://www.bib.bund.de/DE/Fakten/Fakt/S31-Lebenserwartung-Geburt-Geschlecht-ab-1871.html

Saving with a plan

One way of generating the additional amount needed is with a savings plan based on stocks. Such a plan can generate quite considerable capital from relatively small contributions.[8] The longer you pay in, the better. Because very few can do as Aubrey de Grey has done: The Briton inherited over ten million pounds[9] and put most of it in his SENS Research Foundation – which is also a kind of retirement plan.

More articles

Aug 15, 2019 Equities

5G – high-speed radio waves that can make your portfolio fly

The new 5G mobile connectivity standard will provide car drivers, doctors, homeowners and even cities with high-speed data transfer rates. The mobile network of the future has huge potential and should also interest investors.

Aug 13, 2019 Sustainability

MSCI investigates: What are the real advantages of sustainable investing?

Everyone knows that sustainability benefits the environment. But does it also provide financial benefits? Current studies indicate yes.

Aug 06, 2019 Bonds

Bonds – five mistakes fixed-income investors should avoid

Interest rates are low, but bonds still belong in a balanced portfolio. Investors should be aware of certain issues.

See all Investment Topics

1. Source: Financial Times, “Aubrey de Grey: scientist (…)”, February 2017, https://www.ft.com/content/238cc916-e935-11e6-967b-c88452263daf

2. Source: Spiegel Online, “Menschen könnten bis zu (…)”, December 2017, https://www.spiegel.de/gesundheit/diagnose/wie-alt-koennen-menschen-werden-bis-zu-140-jahre-meint-ein-forscher-a-1181499.html

3. Source: World Bank Group, “Life expectancy at birth (…)”, 2019, https://data.worldbank.org/indicator/sp.dyn.le00.in?end=2017&name_desc=false&start=1960&view=chart

4. Source: Welt, “Durchschnittliche Rentenbezugsdauer (…)”, September 2018, https://www.welt.de/newsticker/news1/article181700818/Renten-Durchschnittliche-Renten-Bezugsdauer-seit-1997-um-vier-Jahre-gestiegen.html

5. Source: Stanford, “Financing longevity (…)”, May 2019, https://fsi.stanford.edu/news/financing-longevity-addressing-challenges-aging-world

6. Source: Deutsches Aktieninstitut, “50 Jahre Aktienrenditen”, December 2018, https://www.dai.de/files/dai_usercontent/dokumente/renditedreieck/181231%20DAX-Rendite-Dreieck%2050%20Jahre%20Web.pdf

7. Source: GDV, “Altersvorsorge im Zeitverlauf”, May 2019, https://www.gdv.de/resource/blob/48210/ed0cffec932364cd8748a377bd0c618e/factsheet-data.pdf

8. Source: DWS, “Sparen und die Zeit”, Januar 2019, https://www.dws.de/lernen/know-how/fondssparen/sparen-und-die-zeit/

9. Source: FT, “Aubrey de Grey: scientist (…)”, February 2017, https://www.ft.com/content/238cc916-e935-11e6-967b-c88452263daf

CIO View

Cookies policy:

This website uses cookies in order to improve user experience. If you accept, we will assume that you are happy with this. For more information about the cookies we use or to find out how you can change your settings, see our Cookies Notice.
Accept All Cookies

Other country

Other country

Disclaimer

THE CONTENT PRESENTED HERE IS INTENDED ONLY FOR PROFESSIONAL INVESTORS, E.G. BANKS, INVESTMENT ADVISORS, PENSION FUNDS, INVESTMENT FUNDS, INSURANCE COMPANIES AND SIMILAR LEGAL ENTITIES AND IS NOT INTENDED FOR PRIVATE INVESTORS. BY AGREEING TO THESE TERMS AND CONDITIONS, THE USER CONFIRMS AND ACKNOWLEDGES THAT HE IS ACTING IN HIS CAPACITY AS A PROFESSIONAL INVESTOR OR REPRESENTING A PROFESSIONAL INVESTOR AND IS NOT ACTING AS A PRIVATE INVESTOR.

© 2020 DWS Investment GmbH