Inside Out‘Juvenescence’ and why we need to act younger to thrive in the coming era

On Saturday, two good friends walked excitedly out of hospital with a new son in their arms and 3-year-old Sacha at their side. Among the many thoughts flooding their minds about the future of their family, one was probably absent: there is a 50 per cent chance their kids will both live to be 105.

As I was thinking about the debate now being engaged in Hong Kong on how to build a retirement savings framework for the future, young Sacha and his baby brother came into my mind – and a realisation that the retirement financing issues we are discussing have absolutely no relevance to the challenges they will face in the last 40 years of their 100-year lives. In short, we are focusing our energies on the wrong things.

I have to thank a fascinating new book The 100-Year Life by Lynda Gratton and Andrew Scott at the London Business School for bringing these issues so clearly into perspective. Their conclusion? If we are to avoid future lives being “nasty, brutish and long”, we are going to need to manage a social and economic revolution.

The relentless logic of their book begins with simple, undisputed, but largely-ignored demographics: apart from Sacha probably living to the age of 105 (if he had been born in 1910, his chance of surviving to 105 would have been 1 per cent), any 20-year-old today has a 50 per cent chance of living to 100, and a 40-year-old to 95. Even creaky old me, at 65, is likely to live beyond 90.

These simple demographics put a devastating time-bomb under just about any pension scheme in place anywhere in the world today, and underscore why so many state pension schemes worldwide are unsustainable and close to bankruptcy. A fictitious Jimmy, aged 40 today, would need to save 17 per cent of his income every month to be able to retire at the age of 65 with a retirement income of 50 per cent of his present salary (most people polled worldwide seem to agree that 50 per cent is the minimum they would like to cope on in retirement, assuming they already own their own home). And our fictitious Jimmy has only one response to this savings news: dream on! He sees no realistic possibility of saving so much on a regular basis, without the help of Mark 6. If he chooses to work on until he is 77, then his savings rate could fall to 8 per cent. Even that would be a challenge.

Take a fictional Jane, who is now 18 and about to go to university, and her demographic arithmetic is even more stunning. To retire at 65, and support a 35-year retirement, she needs to save 25 per cent of the income she will begin to earn after leaving university. To get this savings rate down to 11 per cent, she would need to work to the age of 85.