Financing Longevity

TL;DR: Paying for longer lives is a massive challenge that requires breakthrough innovation. Interested to learn about and discuss key issues and stakeholders working to finance longevity? Join us next Tuesday Sept 14th, 5pm Melbourne time for an Aging2.0 Melbourne discussion.

The clichéd picture above is generally what Google, and the mind's eye, comes up with when searching for retirement images. Either that, or a spry, elderly gent happily embracing a perky toddler. The uncomfortable reality is that for ever more people, later life may be more Nomadland than Nantucket; Amazon's Camperforce program offers the increasing number of Americans living in RVs (many of them older) minimum-wage work in a warehouse. This is no knock on Amazon, but it's likely not what many of these people envisaged as their final chapter.

We need to figure out how to pay for longer lives. Life expectancy increases (a child born today has a one in three chance of living to one hundred) have combined with the ending of long-term career paths and increased volatility in employment, lower investment returns for pensions, ballooning healthcare costs and a shift from defined benefit pensions to defined contribution ones. That shift came about since the unfunded pension liability (most from government employees) is set to reach $400 trillion in the middle of the century. However, in keeping with other macro trends, the shift away from defined benefit plans has placed all the risk on the individual. Longevity risk is real and people don't know how to manage it: people are worried about running out of money, and so too are the retirement plans and social security providers faced with ever increasing longevity.?

Here are six key issues around financing longer lives for an individual:?

• Work & Income. A person’s income they generate via working longer switching careers, state benefits and developing side ‘gigs’.?
• Assets. The insurance and annuities, house (if a homeowner) and pensions and retirement funds.?
• Health & care. As they say health is wealth, so this relates to ways to reduce health and care costs, as well as options for a care network (e.g. family members vs professional care).?
• Digital literacy. This covers an individual’s ability to get online and make mobile and internet payments (see the Digital Divide report) and new UI,UX (e.g. voice interfaces)
• Financial management. Ways to reduce fraud and abuse, tax and estate planning and ways to take full advantage of available support services and tax benefits.?
• Living & accommodation. Housing features heavily here - living alone or in-shared accommodation will impact finances, as will the ability to access on-demand services (see e.g. Joe Coughlin’s commentary on this) and also accessing volunteer services.

We’re starting to track a range of startups in the space, here’s 15 that are impacting different aspects of longevity.?Drop others in comments below or DM me.

We will need to put a lot of faith in innovation to avoid Nomadland. Complicating the picture are barriers to innovation such as the embedded ageism that limits employment options for older workers. Healthy aging innovations (and increasingly biotech and genetic science) will help to keep people healthier and more productive longer, while robotics can reduce physical stress. However, we need bigger ideas.

One of the more interesting ones in my mind is the revival of ‘tontines’ - shared annuities where your investment stays in the pool after you die, increasing dividends for those with the good habits, luck (or genes) meaning they live longer. Despite its potential for macabre scenarios, it represents a promising way to cancel longevity risk. Three startups in the space are Tontine Trust (a member of The Collective), Age-Up and Nuovalo.

Dublin-based Tontine Trust founder Dean McClelland will be joining the Aging2.0 Melbourne event on Financing Longevity next Tuesday 14th Sept (5pm Australia, 8am UK), together with Brian Collins from Startup Bootcamp, among others.?Topics we’ll cover include:?

• How can we avoid longevity risk?
• How do health and wealth connect?
• What changes to today’s financial system do we need?
• What startups in the fintech space are we seeing that impact longevity??

This whole topic needs some serious ambition. As this article hopefully suggests: “Humans have always desired health, wealth, and longevity, but usually had to settle for one or two. For the first time people are planning for a very different future with the possibility of living to 100 and beyond and being healthy and financially stable the whole time.”

Let’s hope so. But do more than hope and collaborate to make it happen. I’d be interested to hear your thoughts live next Tuesday, or you can shoot me a message or comment below about key topics outlined above and the organizations and individuals you think should be at the table as we discuss this topic in more detail.