The 100-Year Life

by: SA For FAs

AllianceBernstein: Investors who want to keep income flowing while limiting volatility and downside risk should consider a dynamically managed barbell strategy.

Richard Turnill: A balanced approach is key to investing in the late-cycle period.

Thought For The Day: Just as one needs to continually invest in one’s retirement, so it seems that the 100-year-life requires continual infusions of learning.

Credit Allocation

“Investors who want to keep income flowing while limiting volatility and downside risk may want to consider a dynamically managed barbell strategy. These approaches combine exposure to return-seeking credit assets, such as high-yield bonds and safer government debt, in a single strategy and regularly adjust the balance as valuations and market conditions change.” (AllianceBernstein)

Overall Allocation

“Recent spikes in market volatility remind us a balanced approach is key to investing in the late-cycle period. We still see a narrow path ahead for risk assets to move higher - but there are risks that could knock markets off track. U.S. government bonds have historically played an important role in cushioning portfolios against such bouts of volatility. In equities, we favor the U.S. and emerging markets, with a focus on quality companies that can sustain earnings growth even in a slowing economy.” (BlackRock’s Richard Turnill)

Financial-Planning Computational Innovation

“Every week, it seems, there’s a new financial website with just the right solution for managing your money. ‘We’ll bucket you.’ ‘We’ll goal you.’ ‘We’ll de-tax you.’ ‘We’ll balance you.’ ‘We’ll life-cycle you.’ ‘We’ll advise you.’ ‘We’ll robo you.’ ‘We’ll ….’ These sites have one thing in common -- a complete disconnect with economic theory. None of these sites references economics’ investment mantra – invest to maximize your expected utility from consumption.” (Laurence Kotlikoff)

Restructuring Time

“It’s a rarity to reach 100 years old, but as life expectancies grow longer, what happens when that rarity becomes the norm? Is society prepared for it?” (Introduction to PBS interview with Andrew Scott, author of “The 100-Year Life”)

Thought For The Day

The British government estimates that children born today in the U.K. have a one-in-three chance of living to 100. That is just one fascinating factoid in a 15-minute interview (linked above) on PBS’s Amanpour & Co. with economist Andrew Scott, author of a book aimed at helping people think through the implications of how we restructure our time as our lifespans increase.

In the interview, Scott (and co-interviewee Paul Irving of the Milken Institute) made an interesting analogy, saying that a 100-year life is akin to getting an extra six to eight hours at the end of each 24-hour day. If we had that, who wouldn’t do things differently? Scott said he’d get up earlier, go to bed later, take naps, and eat more but smaller meals. Similarly, one would expect that the current three-stage system of education, work and retirement would yield to a more flexible system than current expectations call for.

While Scott emphasized that longer lifespans imply changes in one’s career, health, relationships and more, he returned over and over again to the topic of education, and rightly so. For example, in noting that “retirement at 65 doesn’t work” and discussing the possibility of two or more careers, he emphasized the need for “learning how to learn,” saying that “nothing you can learn at 20 will last till you’re 80.”

I disagree about this last point. If you learn how to learn at age 20, or earlier, that should keep you in good stead at age 80 or older. But he is correct that people need to make a greater investment in their continuing education. I don’t think society has yet discovered quite how to do this, as exemplified by his openly wondering who will provide this ongoing training – colleges? (I hope we can do better than that – at least on price!)

I don’t see any big institutional shift in how to achieve successful lifelong learning that will help people negotiate careers and retirement in a financially adroit way. A little bit of googling brought me to Jim Kwik, an educational consultant who uses neurological insights to help you create a “Superhero You.” Much of what I saw didn’t register with me, since he places a lot of effort on speed and my natural way is to do things slowly. I believe that people are fundamentally different and you are more apt to succeed if you do things your way and not according to any one-size-fits all approach.

That said, here are my two cents on learning how to learn. First, it is important to approach learning with enjoyment (Kwik, to his credit, emphasizes this). Make learning a daily ritual, and do something that makes you feel good (chocolate, coffee?) before starting each day. Second, Andrew Scott, like many others nowadays, emphasizes process over content – the idea being that information grows stale but one should learn how to access up-to-date material. I think this is a mistake; not everything slides down the memory hole. Rather, one should seek mastery of a subject like biology or history and learn skills or processes like lab-testing or writing. Third, and relatedly, people should seek to acquire both breadth and depth of knowledge. PhDs who know more and more about less and less is not the model; rather, a broad survey of various fields of knowledge combined with in-depth analytical ability in a particular area of interest would provide a solid foundation for lifetime learners.

That would help a 65-year-old running out of steam in his current career but not financially prepared for a 35-year retirement (who is?) pivot to something useful in the job market. Scott noted that just as today, in the post-defined-benefit world, we need to contribute to our own retirement via 401(k)s and the like, so too must we invest in our own adult education. Saying you went to Oxford 30 years ago, when asked about your education, would be akin to being asked about your health and saying you ran a marathon 30 years ago.

Lifelong financial solvency is also like a marathon, which is a good thing actually. In a 100-meter sprint, the person who does not start exactly on time is likely to lose on that basis alone. But in a forty-two kilometer marathon, a less-than-ideal beginning can still end well. In precisely the way one needs to continually invest in one’s retirement, so it seems that the 100-year-life requires continual infusions of learning.


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