Goals-based planning

The new longevity: Financial planning for a longer life

From 16th century conquistadors searching for the fountain of youth to today’s Silicon Valley luminaries seeking to slow the ageing process, humans have long been fascinated with the quest for immortality. While people may not achieve eternal life, science is making advances that could significantly increase longevity—with important implications for your financial planning.

Longer life expectancies will require more resources and more portfolio growth. They also allow us to take advantage of strategies where a longer planning horizon is additive.

Why lifespans could increase dramatically

Medicine and the study of ageing are experiencing seismic shifts. Significant advancements are being made in understanding the biology of aging and how lifestyle choices such as sleep, diet and exercise can add quality years to an individual’s life. Investors are seeing the potential, and in 2022 alone, nearly $5.2 billion was invested in companies focused on longevity.1

Research suggests that drugs such as Ozempic and Wegovy may eventually do much more than treat type 2 diabetes, mitigate obesity and turn their parent companies into the first trillion-dollar pharma giants.2 These and similar drugs may also help extend lives by mitigating notorious lifespan shorteners such as heart disease, sleep apnea and Alzheimer’s.3

When you pair progress in medicine with the fact that maintaining health in retirement is our clients’ top concern, we could be approaching a reality in which living to 100 is the norm.

How do you navigate this new landscape of longer lifespans? It starts with longevity literacy.

  • Take inventory of factors such as family history and lifestyle to help assess the possibility of a longer life.
  • Make sure your financial plan is designed to provide for additional years of spending.
  • Protect your purchasing power against inflation, and leverage planning strategies that benefit from a longer time horizon.

Let’s dive in.

The investment impact of 10 additional years

Currently, a 65-year-old man living in the United States can expect to live until age 84, and a 65-year-old woman to 87, according to the Social Security Administration. Because our clients often have access to exceptional healthcare and adopt healthy lifestyles, we use life expectancies in the early 90s for our wealth forecasting.

Consider a 65-year-old couple, whom we’ll call Tony and Pepper, with standard life expectancies and a $25 million portfolio. Let’s assume their investment portfolio is in a balanced allocation, representing an almost even split between equities and fixed income. Accounting for inflation, taxes and volatility, Tony and Pepper would need approximately $19.5 million of that portfolio to support annual spending of $750,000 for the next 28 years of their expected retirement. That leaves about $5.5 million to fund gifts, charitable donations or a higher level of expenditures, as shown below.

Portfolio assets required to fully fund $750,000 spending goal with lifespans of 90 and 100.

Surplus dollars are needed to meet 10 additional years of spending.

This chart illustrates how much of a $25MM balanced portfolio would be needed today, to fund $750,000 of annual living expenses to age 90 and to age 100.
Source: For illustrative purposes only, J.P. Morgan Private Bank as of April 1, 2024.

Living expenses: An additional 10 years of life puts a surprisingly high level of pressure on this same portfolio, perhaps leading the couple to reprioritize their goals and revisit their strategic allocation. If this couple were to live for 10 more years, they would need nearly all of their portfolio—about $24 million—just for living expenses.

This couple may be passionate about making gifts to family or endowing charitable organizations; however, they should also be aware that spending increases at later stages of life, to fund healthcare, long-term care or even longevity treatments.

Inflation: Then there’s inflation. If we assume a 2.5% inflation rate, our hypothetical couple’s $750,000 in annual spending would climb to nearly $1.5 million by age 93. In another 10 years, it will reach more than $1.9 million.

Healthcare inflation: Also worth noting, for some time now, the rising costs of healthcare and long-term care have outpaced standard inflation. These expenses can put additional strain on your portfolio, especially if required for an extended period.

Taking advantage of a longer time horizon

We suggest a few ways to help your finances benefit from a longer lifespan:

Collect Social Security later: Wait until age 70 to claim Social Security benefits. By waiting, your benefits increase annually by an inflation-adjusted 8%. Obviously, it takes time for these increased benefits to make up for the fact that you were not receiving Social Security payments in your 60s. Typically, you will hit breakeven in your early to mid-80s.

Here’s what Tony and Pepper’s Social Security benefits would look like if they were to claim at age 70 and live until 90 and 93.

Social Security total lifetime benefits at age 90

This chart illustrates the dollar difference in lifetime social security benefits (in today’s dollars) for a high earning 65-year-old couple claiming at full retirement age and age 70.
Source: For illustrative purposes only, J.P. Morgan Private Bank as of April 1, 2024.
If they lived another 10 years, delaying Social Security benefits would add almost $450,000 (in today’s dollars) to their overall wealth:

Social Security total lifetime benefits age 100

This chart illustrates the dollar difference in lifetime social security benefits (in today’s dollars) for a high earning 65-year-old couple claiming at full retirement age and age 70.
Source: For illustrative purposes only, J.P. Morgan Private Bank as of April 1, 2024.

Convert your Roth IRA: Roth IRA conversions can be another powerful aid in planning for a longer retirement. Although several factors dictate the effectiveness of this strategy, part of the calculus is a wager on life expectancy. Every dollar converted to a Roth IRA is treated and taxed as ordinary income. This initial cost is offset over time by tax-free growth that is not subject to required minimum distributions.

A 65-year-old New Yorker in the highest tax bracket might convert $1 million from a pre-tax retirement account to a Roth IRA. At age 90, the value added by this conversion is $1.1 million. At 100, the benefit of that conversion grows to $2.8 million. Each passing year of tax-free growth—without required minimum distributions—makes the strategy more effective. Due to the nature of compounding, this is especially true in the later stages of life.

The benefit of a Roth Conversion grows over time.

This chart illustrates the benefit of a 65-year-old couple converting $1.0MM from a pre-tax retirement account to a Roth IRA
Source: For illustrative purposes only, J.P. Morgan Private Bank as of April 1, 2024.

Proper planning can help ensure that a potentially longer lifespan is filled with quality years—quality that can be realized in health, comfort and financial well-being.

We can help

Now is a good time to review your long-term wealth plan and consider whether it is designed to help meet your goals in the new era of longevity. For a comprehensive health check of your investment portfolio, reach out to your J.P. Morgan team today.

Recent scientific advances promise to steadily improve longevity. The right financial strategy can help you approach a longer lifespan with confidence.

EXPERIENCE THE FULL POSSIBILITY OF YOUR WEALTH

We can help you navigate a complex financial landscape. Reach out today to learn how.

Contact us
Important Information

This material is for informational purposes only, and may inform you of certain products and services offered by private banking businesses, part of JPMorgan Chase & Co. (“JPM”). Products and services described, as well as associated fees, charges and interest rates, are subject to change in accordance with the applicable account agreements and may differ among geographic locations. Not all products and services are offered at all locations. Please read all Important Information.

General Risks & Considerations

Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation/diversification does not guarantee a profit or protect against loss. Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. You are urged to consider carefully whether the services, products, asset classes (e.g., equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with an investment service, product or strategy prior to making an investment decision. For this and more complete information, including discussion of your goals/situation, contact your J.P. Morgan team.

Non-Reliance

Certain information contained in this material is believed to be reliable; however, JPM does not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this material, which are provided for illustration/ reference purposes only. The views, opinions, estimates and strategies expressed in this material constitute our judgment based on current market conditions and are subject to change without notice. JPM assumes no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of JPM, views expressed for other purposes or in other contexts, and this material should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward-looking statements should not be considered as guarantees or predictions of future events.

Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees, irrespective of whether or not such communication was given at your request. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions.

References to “J.P. Morgan” are to JPM, its subsidiaries and affiliates worldwide. “J.P. Morgan Private Bank” is the brand name for the private banking business conducted by JPM. This material is intended for your personal use and should not be circulated to or used by any other person, or duplicated for non-personal use, without our permission. If you have any questions or no longer wish to receive these communications, please contact your J.P. Morgan team.

LEARN MORE About Our Firm and Investment Professionals Through FINRA Brokercheck

 

To learn more about J.P. Morgan’s investment business, including our accounts, products and services, as well as our relationship with you, please review our J.P. Morgan Securities LLC Form CRS and Guide to Investment Services and Brokerage Products

 

JPMorgan Chase Bank, N.A. and its affiliates (collectively "JPMCB") offer investment products, which may include bank-managed accounts and custody, as part of its trust and fiduciary services. Other investment products and services, such as brokerage and advisory accounts, are offered through J.P. Morgan Securities LLC ("JPMS"), a member of FINRA and SIPC. Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. JPMCB, JPMS and CIA are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

 

Please read the Legal Disclaimer for key important J.P. Morgan Private Bank information in conjunction with these pages.

INVESTMENT AND INSURANCE PRODUCTS ARE: • NOT FDIC INSURED • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED BY, JPMORGAN CHASE BANK, N.A. OR ANY OF ITS AFFILIATES • SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED

Bank deposit products, such as checking, savings and bank lending and related services are offered by JPMorgan Chase Bank, N.A. Member FDIC.

Not a commitment to lend. All extensions of credit are subject to credit approval.

Equal Housing Lender Icon