- 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.
“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. 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.
In 2017 the average number of years that retirement benefits were drawn in germany was 20 years.
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. After all, life expectancy has been going up worldwide for years, as World Bank data shows. 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. 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. That’s about 359 trillion euros at current exchange rates.
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. 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. 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.
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. 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 and put most of it in his SENS Research Foundation – which is also a kind of retirement plan.