Philadelphia Reflections

The musings of a physician who has served the community for over six decades

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Financial Planning for a Long Retirement

How should individual investors ensure they have enough money for retirement?

Such a person is often a professional or entrepreneur who has worked to accumulate the wealth. Legions of "advisors"line up to take this money and manage it or else to sell "products" that promise to solve some problem or other. Without this background, extra savings will be needed, to buy advice. And advice is not invariably reliable.

A person who has created his/her career and its wealth from scratch, can likely manage investments themselves, or at least supervise the process from a position of strength from observation. Reliable advice is not always cheap.

This collection of articles explains to the individual investor how to take control of their wealth. They may eventually decide to look for help from an advisor but they will retain control of their assets and they will know what to do.

Financial Planning videos on YouTube

Innate Longevity

Someone must have made a study of longevity because the externals give every sign of genetic control. Pets and domestic animals vary widely in their typical lifespans from a few hours to more than a century, but each species seems to have characteristic longevity, roughly in proportion to its typical overall size. Within a certain limit, each species of a pet seems to live about the same length of time, suggesting some variety of genetic control. The human species is of most concern to longevity in the life insurance industry, and it is commonly noticed that very few people live beyond the age of 110, except in Biblical accounts of doubtful accuracy. Until recently, the average human longevity was what it was, but if we are to base insurance on this topic, it will soon enough be important to know how difficult it would be to lengthen it artificially. Right now, it appears to be next to impossible, but the same question got a different answer a century ago, and the answer has approximately doubled.

Bear in mind that the purpose of tinkering with longevity is to affect the cost of the insurance, and there are two natural forces at work == inflation and compound interest. They work in opposite directions; inflation reduces the available funds over time while compounding increases it. Since inflation is under human control whereas compounding is purely mathematics, only inflation is likely to be changed, while compounding is likely to increase the size of the principal. There are limits, but at a duration of 90 or 100 years, the net of inflation and compounding is apt to improve the size of the reserves. In any event, only inflation needs to be monitored in order to make adjustments, and after fifty or so years, it would have required pretty drastic changes to put similar life insurance started by President Hoover at mathematical risk today.

Since there is thus no need to worry about the finances of this system back to some Roman Emperor, approximately half of the permanent healthcare cost can be predicted (one-off forever) and some clever actuary could thus calculate what it would amount to, per year.

Originally published: Saturday, November 25, 2017; most-recently modified: Wednesday, May 22, 2019