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Mark Daly: Investing in the Age of Longevity

“You can’t help getting older, but you don’t have to age.” — George Burns

I met Mr. Burns at West Hollywood’s Dan Tana’s Restaurant in the mid-1970s. He strolled in with his entourage, a beautiful blonde on each arm, smoking his signature cigar. I remember thinking he looked pretty darn good for a man of 80. If George was concerned about his age, he didn’t show it. His career continued for another 20 years until his death in 1996 at age 100.

The Age of Longevity in the U.S. is upon us. Statistics prove conclusively this is so. We recently hosted a client event called “Life with Aging Parents.” Our panel of professionals talked about clinical and medical issues, and legal and regulatory challenges for seniors. We heard first-person testimony of an unpaid caregiver whose husband was diagnosed with early-onset Alzheimer’s disease at age 50 and died 12 years later. We learned our audience was hungry for the information, especially because it can be difficult to discuss such topics with adult children, many of who are scattered across the country. Nearly everyone had a personal story to share.

As financial advisers, we will be called upon to deliver a much broader range of services in the future by providing more choices about planning, spending and investing that address the needs of an aging clientele. It’s common to have mortgage debt in retirement, outdated or incomplete estate documents and completely or partially dependent adult children. Careful planning and ongoing financial monitoring will be essential for success in retirement.

Our focus remains on measuring progress to a goal rather than trying to beat a particular index. Careful analysis of the family balance sheet allows our clients to adapt to changing family and health circumstances. Financial market performance in a given year could to a large degree determine if annual flexible spending will be favored over fixed pension-like payments. We are striving to include generations in the planning process. It is now common to work with three generations, and fourth-generation planning is conceivable.

One thing is certain: Transfer payments and entitlement benefits could decline as a portion of annual personal spending for retirees of the future. Public debt continues to grow while popular programs like Social Security, Medicare and Medicaid consume larger portions of federal and state budgets. Traditional pensions face the same challenges, compounded by many years of near-zero interest rates.

Wells Fargo Securities recently published a research paper titled, “Longevity — Conventional Wisdom about Aging is Getting Old.” It highlights sectors and companies that could benefit from the current demographic and aging population. Health care is obvious, but you might be surprised to see consumer, energy and industrial sectors are also included.

Many challenges lie ahead for retirees, caregivers, adult children and professional advisers. Working together to solve these problems will require careful coordination and communication from each to serve our 90- and 100-year-olds in the Age of Longevity.