- Higher life expectancy rates mean some Gen Zers could be retired for 50 years, according to UBS.
- A portfolio must beat inflation by 2 percentage points to retire well, the bank said.
- The increase in longevity has attracted increasing interest from economists in recent years.
According to UBS, members of Generation Z could spend up to 50 years in retirement. So they should start investing as soon as possible.
The Swiss bank said young people would remain retired for half a century, based on a recent Swedish study that found artificial intelligence could extend the average lifespan to around 120 years in this century.
Typical investing wisdom posits that a retired person’s portfolio should aim to keep pace with inflation.
However, in a scenario where a person doesn’t work for decades, their assets need to exceed the rate of price increases by about 2 percentage points to retire comfortably, according to a team of UBS strategists led by Lee Wen Ching.
“The traditional school of thought supports the thesis that investment returns should at least match inflation,” she writes in a research note. “But taking expenses into account, we conclude that a portfolio actually needs to earn at least 2 percentage points above the cost of living to be able to last 50 years in retirement or more.”
The cost of living crisis has also tended to disproportionately affect the wealthy – so those who want to retire and then live a life of luxury will need their portfolios to beat inflation by an even larger amount important, according to Wen Ching.
“Lifestyle, preferences, educational choices: these are all factors that determine our spending habits,” she writes. “Dining at a Michelin-starred restaurant would have cost 11% more each year, while eating home-cooked meals could have been more cost-effective.”
Increasing life expectancy globally, declining birth rates, and the rise of trends such as the FIRE movement have made longevity and retirement increasingly pressing issues for economists these last years.
Last month, economist Andrew J. Scott told BI that new thinking about aging could help solve a potential retirement crisis.
“Obviously, climate change is a major problem. AI is now an obsession about how we can adapt and change our future, but we never talk about adapting to aging,” he said. -he declares. “We never invested enough in old age, because we thought we would never get there – and now we will.”
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