Our purpose of course is to enjoy a full and wholesome life – never falling short, not outliving our money. We aim to ensure wealth and abundance as long we have the life and breath to enjoy it.
Dear friends, living longer means our world is aging …as you’ll see graphically in a picture below.
Healthy aging means we’ll need an endless supply of money to sustain our lifestyle, personal comforts, creative passions, and later-age care. Our enemies would include stagnant economic growth, rising health costs, sudden risks whether personal or financial, and near-zero interest rates. Another enemy is if someone lacks a conscientious plan to navigate such labyrinth.
Growing Economy won’t prevent a Collision
Canada’s economy has recently expanded faster than any time of the past three years. This offers some compensation for the trough of energy prices and devastation of wildfires at Fort McMurray. Canada’s banks are reducing loan-loss provisions from energy companies, and hedge managers in the U.S. who expected our banks to plummet are changing their view. Exports have put in a strong quarter. Employment is hopeful. Interest rates are lower for longer (for better and worse). Investment values are rising. It’s a good thing we ignored news media last January who were forecasting deatha and dismay in investment markets!
To be wise, now, we keep our view on the horizon going forward. Two facts seem unavoidable. These definitely impact how we design your plans and future security. One fact is that we are living longer, aging slower. Another is having interest rates near 0. These suggest a collision on the runway of life!
Living Longer — Cheating Death
We are the youngest generation to ever reach …insert your age or expected lifespan. When Bismark opened the world’s first pension plan, death typically occurred before people were eligible for pension. Many actually got nothing. When CPP opened in Canada, it gave people a few years of modest support. People turning 65 today may live 20 to 30 years in retirement, and each year adds a further 8-10 months to their lifespan.
If some grandparents lived to 80, could it mean our generation may reach 90 to 100? We had better take care of our health along the way as our future has many opportunities but also many potholes. We need to be prepared.
The above picture compares 2010-actual and 2050-forecasts of population over age 65. If you find a bit of red in 2010, you’ll see red everywhere in this 2050 picture. Outside of Africa, India, and Pacific Islands the world will be making all-time records for over-65, over-85, even over-100!
See “Cheating death” in The Economist, Aug 13/16, page 7, (link). This is the most effective page ever written on the promise and perils of delayed aging. “Adding Ages” in the same issue discusses how we can age youthfully (pp 14-16, link). These two articles are free without subscription.
Living to 90, 105, or 125 presents a deep concern of outliving one’s money. So stay with me here as we focus on Healthy Life, Healthy Money (below).
Pensions Cheating Pensioners
We’ve shared before, 82% of Canadian pension plans are in deficit. In the UK, 85% of pensions are in deficit (£ ½ Trillion). People expect a healthy pension, but governments and companies have failed to save the necessary funding.
Forwarded to me this month by a professor who watches such issues is an estimated $6 Trillion pension cover-up in the U.S.A. The money isn’t there. (The lowest estimate of U.S. pension deficits is $1.5 Trillion and even that is a calamity.) U.S. pensions hold Treasury Bills with 10-year rates paying 1.5%, while growth projections assume 7.5%. Seeking 7.5% on a total portfolio require high-risk, high-volatility investments that can end in ruin. Annual pension contributions fall short, and don’t even cover the 2016 deficit let alone the gap from former years. The shortfall resembles the California aquifer: pensions and water supply are on the same sad course.
Health Costs: Worst for Last?
Canadian and American health costs have been out of control for over 20 years. Current health-spending is 17% of GDP in the U.S. and 11% in Canada. And it’s rising! Health costs triple between age 65 and 80. Then 85% of lifelong health costs hit the last 5 years of life. Over the next 20, 30 years this picture will continue hitting governments, tax bills, and personal savings.
Healthy Life, Healthy Money
We speak often of the financial platform (LIM) to ensure wealth can survive these threats. A retired gentleman recently asked me about our financial process and my focus on Income for Life. His career was pension management and when I mentioned our vital focus on rising income yield from domestic and global dividends, infrastructure, and real estate he said, “So you’re looking at this like a pension manager wants to do, to ensure peoples’ income for life …yet also for their families.”
He saw and agreed with me that this focus is our best approach to safeguard Money for Life. Financial risks are everywhere. We’re living longer than ever. Greatest worry for many people today is financial failure while still living. We therefore are carefully focusing year-by-year to reduce risks and perpetuate your wealth … to assure your comfort and happiness as life continues.
Freely share this letter whenever it can help a neighbour or friend, and ease the concerns of someone you know. Introduce us — we love to help.
Yours in Financial Security for LIFE!
Brian Weatherdon, MA, CFP, CLU, CPCA. 905-637-3500
627 Guelph Line, Burlington, Ont. L7R 3M7. 1-877-937-3500
Author: A Lifetime Of Wealth — And How Not To Lose It (2013). Protecting Life, Loved Ones, and Future Dreams (2013). Your Business, Your Retirement: Halton Retirement Study (2015).
** This monthly letter touches on key strategies in Canadian and global investing and financial planning. This letter is not an offer to sell any kind of security, insurance, or program. Historical returns and risk measures are not a valid guide to future performance. Returns are from publicly available sources and research from a variety of firms including but not limited to GLC, RBC, CIBC, Mackenzie, Franklin Templeton. Opinions reflected in this letter belong solely to the author and no other body is responsible for the content expressed here. We value opportunity to consult alongside your legal and accounting firms to advance your financial security and unique goals. We are grateful always to receive your comments and questions.