The path to non-re­tire­ment

The hu­man lifes­pan is get­ting longer and longer. What does this mean for those who are putting money away for re­tire­ment? And can you imag­ine do­ing the same job for over 70 years?

Finweek English Edition - - COLLECTIVE INSIGHT - By Deon Gouws Deon Gouws, CFA, is chief in­vest­ment of­fi­cer at Credo Wealth.

when I started a ca­reer with one of the Big Four ac­count­ing firms in the late 80s, my new em­ployer ar­ranged an in­duc­tion pro­gramme in the first week. One of the pre­sen­ta­tions was from the head of the Per­sonal Fi­nan­cial Plan­ning di­vi­sion, who opened with the fol­low­ing line: “In 40 years’ time, 15% of you will be dead – and they are the lucky ones!”

What he was re­fer­ring to, of course, was the very real risk of out­liv­ing one’s money – es­pe­cially in the con­text of speak­ing to a bunch of newly qual­i­fied pro­fes­sion­als with a rel­a­tively high propen­sity to con­sume.

Fast for­ward the bet­ter part of 30 years, and this fi­nan­cial health warn­ing could not be any more apt to­day.

First, we are all likely to live even longer than pre­vi­ously an­tic­i­pated. With health­ier life­styles in the West, com­bined with a mul­ti­tude of ad­vances in the med­i­cal field, stud­ies show that life ex­pectancy has in­creased by some three to five years over the last three decades alone (the ex­act num­ber be­ing in­flu­enced by a num­ber of fac­tors, in­clud­ing coun­try of res­i­dence and gen­der).

In fact, if one buys into the the­o­ries of the English geron­tol­o­gist Aubrey de Grey – who pos­tu­lates that most of the known causes for death from a bi­o­log­i­cal point of view can ei­ther be cured fully or slowed down dra­mat­i­cally – there are peo­ple alive to­day who could live to the age of 1 000… imag­ine what that would mean for a pen­sions cri­sis!

But the fact that we’re liv­ing longer is not the only chal­lenge to our long-term fi­nan­cial well­be­ing: we also hap­pen to find our­selves in an age where ex­pected re­turns from a range of in­vest­ment al­ter­na­tives are at or near all-time lows. Ac­cord­ing to the now-fa­mous Shiller CAPE (cycli­cally ad­justed price/ earn­ings) ra­tio, stocks are trad­ing at mul­ti­ples seen only twice in the past 140 years. Closely linked to this is the work done by highly re­garded in­ter­na­tional in­vest­ment firm GMO, whose most re­cent re­turns fore­casts for all the ma­jor as­set classes are in­di­cated on the graph above.

The mes­sage there­fore is that the next decade or more is not a time in which you should ex­pect much as­sis­tance from “Mr Mar­ket” in cre­at­ing mean­ing­ful wealth. Ac­cord­ingly, most of us prob­a­bly have to pre­pare our­selves for a longer ca­reer than pre­vi­ously imag­ined (un­less of course one is for­tu­nate enough to have built up a size­able nest egg al­ready).

An­other point to con­sider is that many of us could face pro­fes­sional ex­tinc­tion in the next few years, as prac­ti­cally ev­ery work­ing en­vi­ron­ment is be­ing dis­rupted by tech­no­log­i­cal ad­vances. Chances are that you may soon have to re­train as a con­tent mon­i­tor for a lead­ing so­cial me­dia web­site, rather than con­tin­u­ing as a “nor­mal” jour­nal­ist, for ex­am­ple.

Speak­ing of jour­nal­ists, well-known colum­nist for the Fi­nan­cial Times, Lucy Kell­away, re­cently an­nounced that she will be leav­ing her well­paid job at the news­pa­per af­ter 31 years to take on the role of a maths teacher at a “chal­leng­ing” se­condary school in Lon­don. What’s more, she’s also set­ting up an or­gan­i­sa­tion to en­cour­age other pro­fes­sion­als to join her in spend­ing the rest of their ca­reers in the class­room.

Kell­away’s change of ca­reer is a very good ex­am­ple of some­thing which the late man­age­ment guru, Peter Drucker, dis­cussed in his book Man­age­ment Chal­lenges for the 21st Cen­tury. In a chap­ter en­ti­tled Man­ag­ing One­self, Drucker ad­vises the reader to pre­pare for the se­cond half of life, quot­ing the ex­am­ple of Max Planck who had not one, but in fact two more ca­reers af­ter orig­i­nally re­tir­ing as a ground-break­ing sci­en­tist in his 40s.

“Find a job you en­joy do­ing, and you will never have to work a day in your life”… this is a quote var­i­ously as­cribed to Con­fu­cius, Marc An­thony, MarkTwain and a num­ber of other philoso­phers and au­thors. But no mat­ter who ut­tered th­ese wise words first, there is cer­tainly a lot of truth in it – and there’s a much bet­ter chance of get­ting it right later in life, when one has suf­fi­cient self­aware­ness to make bet­ter and more in­formed choices. The big­gest ad­van­tage of find­ing this “perfect” job later in life, how­ever, is that it’s far bet­ter than re­tir­ing pre­ma­turely (and tak­ing the sub­stan­tial fi­nan­cial risk that comes with it). I will thus amend the quote as fol­lows: Find a job you en­joy do­ing, and you will never have to worry about when it’s time to re­tire! ■

The big­gest ad­van­tage of find­ing this “perfect” job later in life, how­ever, is that it’s far bet­ter than re­tir­ing pre­ma­turely.

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