Marc Doss, CFA, CFP, California, Nevada
John Lynch, Mid-Atlantic
David Roda, CFA, Southeast
Cam Hinds, CFA, Great Lakes
Michael Serio, CFA, CAIA, Mt. Northwest
Sean McCarthy, CFA, Southwest
Kei Sasaki, CFA, Northeast   

In this Monthly Market Advisor:

  • We believe total return investing remains a critical strategy for longer lives.
  • Multi-stage lives are replacing traditional lives.
  • Investors seeking financial well-being should look beyond investment management.

Download the report (PDF)

Investing in a world of longer lives

Today, the average life expectancy in the U.S. is 84.3 years for a man and 86.6 years for a woman.1 People are also living higher quality lives in terms of overall health and well-being. Many Americans may live three decades or more in retirement. The numbers are more impressive for a newborn child. A child born in the U.S. today has a 50 percent chance of living 100 years.2 A 100-year lifespan is becoming common, and our society must adjust. However, in our opinion, living longer requires more than just investing wisely. It should also include utilizing more holistic services essential to daily living.

One major challenge of longevity is the possibility of outliving your assets. To address this concern, we strongly recommend that investors go through a detailed wealth planning process. This is the first step to your understanding what is required in terms of saving and investing to help achieve your unique goals. From a wealth plan, a detailed investment program can be developed.

Investors have unique financial goals and objectives, but there are some common strategies that can improve the odds of meeting these goals and objectives. One key strategy is to shift away from a purely income-generating strategy to one of total return: income plus capital appreciation. We believe this approach allows for greater flexibility and better suits a longer investing time horizon. This approach frees investors to look across a larger opportunity set of investments. Investors should look beyond bonds and consider investments such as stocks, real estate, and, for qualified, financially sophisticated investors, private capital. This approach allows for return streams that include the potential for not just interest on bonds but also dividends on stocks, income from real estate, and other alternative sources of income. This diversification of return streams potentially offers a better risk and return profile for portfolios in changing economic environments. The pie chart shows an example of an asset allocation that is designed to generate diversified income streams and total return.   

Hypothetical diversified income portfolio


A pie-chart of a hypothetical diversified income portfolio. Contact your Relationship Manager for more information.

Source: Wells Fargo Investment Institute


The emergence of multi-stage lives

The standard framework for a full life span was traditionally broken down into three primary stages:

  1. Childhood and education
  2. Career and raising a family
  3. Retirement and leisure

With the extension of life expectancy, some people may need to move away from these three stages to a multi-stage life. For example, in today’s ever-changing economy, many people may have multiple careers. They may also take extended time away from work to help raise their family or take care of elderly parents. Some may find they need additional education to keep up with an ever-evolving economic landscape. Other workers may have the financial resources to take time off from work to pursue other passions such as charitable causes. Some workers may re-enter the workforce later in life, not for compensation but for the stimulation or intellectual challenge. Multi-stage lives require flexible financial management to account for the possibility of years without wages and a reliance on savings and investments. Financial resources may be needed for additional education. Some people may need to work longer or reevaluate their spending habits in an effort to generate sufficient savings for retirement.  

Beyond investment management

In our view, financial and asset management will be critical in this world of longevity. Unfortunately, they may not be sufficient for all the challenges of a 100-year life. For example, how can investors address the needs of an aging parent who can no longer care for themselves? This investor may have a highly demanding career and family life, and may not even live in the same city as their parents. Some investors may have a special needs child who requires additional care and protection for his or her entire life. Such investors may need resources beyond asset management.

A longer life span often equates to additional complexity for investors, especially those with significant wealth. This added complexity could potentially drain the energy and resources needed to generate earnings and savings. In our view, investors who leverage relationships and additional resources are more likely to be successful and enjoy the added time that comes with longevity. Otherwise, they may find that longevity is not a gift but rather a burden.

One example: Life Management Services

Financial literacy normally peaks for people in their 40s and 50s. That is when experience and knowledge combine best with analytical functioning. As the aging process continues, many people will need much greater assistance across a spectrum of needs. Financial protection from elder abuse becomes equally if not more important than asset management. By the time many people are in their 70s, they may often require some form of investment management assistance. And by their 80s, they may find that they will likely need more comprehensive assistance with life management services, such as healthcare planning and coordination, medical claims processing, asset and liability management, and stage-of-life planning. 

Conclusion: Embracing the gift of time

A longer life requires greater financial resources and flexibility. Consider the following: 70 years of life equates to 407,680 productive hours while a 100 years of life equates to 582,400 productive hours. (Note: This assumes that someone is active for 16 hours per day and a 52-week year). A 100-year life offers nearly 175,000 more hours of productive time. The extra 30 years of living will likely require many more years of work and savings for most. For some, however, the extra years and hours will mean greater fulfillment in all facets of life. These extra years will require stronger partnerships. In our opinion, these partnerships should focus not just on family, friends, and work. Longer lives well-lived also may require broad financial partnerships. These partnerships should encompass much greater breadth and scope than just investment management. Pursuing financial well-being may require some investors to reach beyond investment management to include life management services. A life well lived will likely be a life well connected.


1 Source: Social Security Administration, ssa.gov, November 2015

2 Source: Human Mortality Database, University of California, Berkeley and Max Planck Institute for Demographic Research (Germany), mortality.org