We Americans are living longer than ever before.
With our increased longevity comes the need for a long-lived nest egg that can carry us through these bonus years. Interestingly, the better educated you are, the smarter you need to be about investing for a long retirement.
Allow me to explain.
Consider recent research on the topic:
“In 2011, US mortality rates reached record lows for both women and men; as a result, life expectancy at birth reached record highs: 81 years for women and 76 years for men. These are impressive figures. As recently as 1960, women’s life expectancy at birth was only 73.1 years and men’s only 66.6 years. Within 50 years, life expectancy at birth increased by 8 years for women and nearly 10 years for men.”
This quote and the data behind it are from an article from researchers Robert A. Hummer and Elaine M. Hernandez. What’s just as interesting as their finding is the title of their article: “The Effect of Educational Attainment on Adult Mortality in the United States.”
So, we’re not talking about income inequity here – the data aren’t about how billionaires live longer than millionaires. Instead, the findings point to a link between longevity and education.
Take a look at this chart from their research. It shows the mortality rates for adults based on educational attainment:
The relationship here is clear; the more education a person has, the longer their life expectancy. The mortality rate for ages 25 to 64 is four times lower (931 versus 213) for men with 16 or more years of schooling.
As further evidence of the medical acceptance of this relationship, the former CEO of Aetna, John Rowe, is known for saying, “If someone walked into my office and asked me how long they will live, I would ask two questions: What’s your age, and how many years of education did you receive?”
If anything, this trend could accelerate even more in the coming years and decades, as the more educated among us have more access to the latest developments in medical technology.
Now, to be clear, this is not a study that indicates that those that are more educated necessarily are richer, or have better access to health care. This study is not about income inequality. It is a straightforward look at the direct correlation of education to longevity.
It is true that not everyone has the same access to education. There are still inequities regarding affording college tuitions. But, think of how far we have come. In 1940, according to the US census, less than 5% of the population had a four-year college degree. Today, that number is over 30%. That still means that almost 70% of people have fewer years of education, but it does show an upward trend.
And there are the social advancements that have benefited the vast majority of Americans since the early 20th century, such as better sanitation, less pollution, and ever-improving medical technologies and information.
Still, when we consider the data, we do have to consider whether more education leads to access to more capital, lower smoking rates, more exercise and access to healthier foods (which can be more expensive than their processed counterparts).
But the numbers are the numbers. And with this point in mind, we get to the planning piece.
Now, a 62-year-old couple who are both non-smokers will have a joint life expectancy of 30 years. Put another way, one (or both) may reach age 92. And there are millions of people living longer every day than the average. Today, 10,000 Baby Boomers will retire. That’s the trend now in America – every day an astonishing 10,000 people retire. Imagine what the population of folks 90-years-old or older will be in 20 or 30 years!
And my point of discussing this research is this: With our increased longevity comes an increased need for longevity of income. If you are living longer, you’ll want that retirement nest egg to carry you through your long years of life. Your money will need to last longer than your parent’s money.
Recently, I wrote a piece for the Atlanta Journal-Constitution that spoke to the power of dividends and a focus on the growth of income. This topic couldn’t be timelier.
The most powerful force for growing your income that I know of is finding companies that grow their dividends. This approach has been a powerful wealth creation tool for investors for the past 100 years, and I don’t see that calculus changing for the next 100 years. While the winning companies may change, the economy will change and the world will change with it, the math behind a company growing and rewarding their shareholders with dividends in the public market place won’t.
So, if you aren’t already an income investor, perhaps now’s the time to start thinking about how to grow your portfolio into one that kicks off a steady stream of income. As always, we’re here to help.