90, the new 70

I read recently that, according to the Census Bureau and the National Institute of Aging, the number of people in the US who are age 90 or older has nearly tripled since 1980. This is pretty remarkable. At the turn of the last century, life expectancy in this country was 47 years. While that figure is skewed by much higher infant mortality, people were living much shorter lives than they are today.

Keep in mind that life expectancy is the average. Half of the people will reach that age. The other half won't make it. If you are in good health, eat well, exercise and avoid smoking and heavy drinking, you are likely to live beyond life expectancy.

If you are curious about how long you will live, you might try the calculator at Living to 100 http://www.livingto100.com/. I did and I learned that I better plan to live to 100. (All of my grandparents lived to age 90. One lived to 95 and another lived to 98. So, I have a decent shot at making 100.)

When I give clients a retirement planning questionnaire, they often put down an age for life expectancy that they relate to their parents and/or grandparents. The problem is that they are likely to live longer than the generations that preceded them.

A good financial planner will model at least 5-10 years beyond current life expectancy. If the your goal is to live comfortably for as long as you live (i.e. to not run out of money), then you should make sure you have a safety margin for those extra years.

Happy Thanksgiving!

This Time is Different

If you are interested in placing the current global economic crisis in perspective, I recommend reading This Time is Different by Ken Roggoff and Carmen Reinhart. I read it while I was in Nepal and it helped me understand the history of these crises. We've been careening from crisis to crisis for literally hundreds of years. The current crisis is rather acute and we will not emerge from it any time soon.

I watched the republican presidential debate last night. I was not inspired. I would really like to see our leaders, in both parties, begin having a candid conversation with the American people about how we can solve our economic problems ... unemployment, national debt, budget deficit.

The solution is really pretty straightforward. But it is not easy and not appealing. So, no one really wants to talk about it. The solution is really pretty straightforward. But it is not easy and not appealing. So, no one really wants to talk about it. I'm sure they calculate that, if they tell us the truth, they won't stand a chance of getting elected.

Here's what has to happen:

1. We need reduce our expenses AND

2. We need to increase our revenue.

3. We may need to sell some of our assets to pay down our debt

Simple. This is what I advise clients to do if they are struggling with debt or negative cash flow. Our government is no different.

By the way, the title of the book is a tease. This time is not different.

Confidence has its Limits

A prospective client sent me an article that ran in The New York Times on October 19, 2011.

It was written by Daniel Kahneman who is an emeritus professor at Princeton and winner of the 2002 Nobel Prize in Economics. He is a leader in the area of behavior economics.

The article, "Don't Blink! The Hazards of Confidence" is quite interesting.

Investors who believe they are able to beat the market would benefit from considering Kahneman's message.