Ric Edelman Expects Living Past Age 100 to Force Major Savings Mindset Change

Ric Edelman, founder of the Digital Assets Council of Financial Professionals and Truth About Your Future, told an audience at a longevity conference that, because people will live much longer than anticipated, they must turn to investment management to ensure retirement security.

“We begin with the notion of longevity; it all starts there,” Edelman said at the April 20 Founders Summit 2023, an event hosted by the AARP AgeTech Collaborative and Primetime Partners. “Most people are unaware of their longevity. Most don’t realize that the bottom line is if you’re alive in 2030, you’ll probably be living past age 100. People don’t realize that. They believe that they’re going to die in their 80s.”

Edelman, who is also the founder of Edelman Financial Engines, said there are cases where financial planning projections do not accurately predict people’s longevity.

“If I project you’re going to live until age 90, and I look at your income, your assets, your savings rate, etc., you’ll be fine,” said Edelman. “But if I change that age to 100 or 110, that financial plan blows up. In other words, most people are not going to have their money as long as they can.”

Edelman told the audience people should realize they’re going to live a lot longer. The longer individuals lives, the more expensive life becomes, especially as they spend most of their money on health care in their older years.

The next goal is retirement security to guarantee that someone’s money lasts as long as they do. Edelman said this is particularly pressing given the impending Social Security crisis that could see its trust fund go broke in 2034.  Edelman expects Social Security benefits will be cut by roughly 25%.

“Since half of America gets half of their retirement income from Social Security, this is a huge crisis that’s coming,” said Edelman. “That means we go to investment management: How do you not run out of money? That means making smart investment choices today.”

With that in mind, Edelman suggested the investment strategy of doing away with the 60/40 portfolio model.

“No. 1, the 60/40 model is gone: The notion of 60% of your money in stocks, 40% bonds is gone, because we’re going to live much longer,” Edelman said. “You need to have 70/30 or 80/20. You need to do it for much older, because you’re going to live so much longer.”

Edelman said equity allocation needs to be much heavier in exponential technologies, those expected to double in capability or halve costs on a recurring basis. He specifically identified examples like artificial intelligence, robotics, nanotech, biotech, bioinformatics, crypto and financial technology. People should invest in the future, and they need to have much larger allocations of their portfolio aimed for much longer, Edelman said.

“Even though as a retiree, they’re not earning an income, they still have investments. They have money in retirement accounts, IRAs, savings,” said Edelman. “Retirees think, ‘Now that I’m retired, I need to focus on preserving income,’ and our answer is, ‘Wrong.’ We need to focus on increasing your equity allocation.”