College Exam Question: Are You Ready To Live For 150 Years? (If you're college age, you MUST read this article!)

Why should I worry about this? Nobody lives that long.

If, as some experts predict, there will be medical techniques available by the year 2100 to enable some people to do that, then someone is living already who may survive to age 150. And that's not expected to be the end. Continuing progress in the sciences dealing with gerontology and longevity will mean ever longer survival. Charles Mann addresses this issue and many related problems in "The Coming Death Shortage."

Though there are social dilemmas relating to immortality—like endlessly working seniors, 80-year-old children living at home, and a host of others—the overarching problems are in some form economic. Some will say this improves one's opportunity to accumulate the assets necessary for long-term survival; you have more time to let compound interest work as well as just more time to enjoy spending in youth and only begin to save later. The problem is, there is only so much total wealth, and by living forever, seniors will not only control more wealth, they will reduce the supply available for younger citizens to accumulate for themselves.

Here we will only discuss some of the economics to show how important it is for a person to begin a long-range wealth accumulation program, starting immediately. A perfect time for this is when one is in college. Those in the same age group who aren't attending college should also be gathering their own supply of wealth, but that is another subject. For now I direct my consideration to college students.

These are a few things people must address relating asset requirements for survival in old age, regardless of whether they are considering our present normal life expectancy of 77.2 years or a possible future extended life up to 150 years or more.

First on the list is the money required to build assets needed for future income. Before retirement income normally is provided by the wages you are paid for whatever it is you do in your job. Whenever you decide to retire you will have to rely on the monthly income you receive from accumulated savings, other investments, and Social Security.

So, how much money will you need 45 years in the future when you retire? As a college student, you're about 20 years old and you're going to be healthy and live forever-let's hope. To plan for future needs, you must determine how much income you will need and then see how much you have to put away on a regular basis so you'll have the wealth needed to furnish the monthly income you want and need upon retirement at age 65 or 70.

There are many retirement calculators you can use to help you have an idea of your financial situation years into the future. You will need one kind of calculator, for instance, to show how much monthly income you will receive from a given amount of accumulated assets. The idea is to estimate your income requirements and use this calculator to see how much you must acquire during the intervening years to give you what you want. Always remember this kind of planning is continuous and must be updated regularly. You can't just make the estimates and do the calculations once and then forget it, because the factors that influence it (inflation, interest rates, etc.) are constantly changing. You must constantly revise this even, after you may begin drawing down your assets.

I am a 20 year old college student just beginning to think about my financial future. How do I know how much money I'll need 50 years from now when I may retire? 

Start with the best data you can find which may be from the US Census Bureau. Whatever income estimate you first use, it is necessary for you to constantly revise it and adjust for future inflation. We aren't going to do this; we're just going to use current information to illustrate how you might use this information. 

The Census Bureau says a bachelor degree graduate earns an average $51,206 annually. Begin with this and estimate you will need only 75% at retirement because you may not have the mortgage payments and costs associated with daily working (you can play with this any way you want; just remember the more you want the more you have to save). Using this method you can estimate you will need $38,404 (51,206 X .75 = 38,404) which is $3,200 monthly. Using the calculator above, you will find that an accumulation of about $700,000 is necessary to achieve this after-retirement income. This assumes 5% rates of return, current tax rate 25% and after retirement rate of 15%. To use this formula you must juggle the Starting Balance as well as the other variables to achieve your target income amount. We also assumed a retirement age of 70, anticipating that future changes in retirement rules will increase "normal" retirement from 65 to 70 years. 

So how do I accumulate this much money?

Begin your first plan by using this "Retirement Calculator." It's very simple to enter your present age of 20, your expected retirement age of 70, assume 5% rate of return, and then show your expected asset accumulation of $700,000. The calculation will show you need an annual fund contribution of $3,344 each year for the next 50 years. That should be easy because you'll be making over $51,000 every year. Isn't this true?

Not exactly. There are some serious deductions from your $51,000. Consider these hypothetical expenses:

• Annual home mortgage payments $12,000
• Property taxes and fire insurance $2,500
• Annual premiums on $1,000,000 whole life insurance $15,000
• Annual auto and credit card payments $12,000
• Income tax @ $12,802

Total expenses are $54,302. You have run out of money to live on, not even allowing for any saving for the future. These assumptions do not include regular living expenses or anything set aside for children's college costs! Also not included is any provision for early retirement or the possibility of a disabling disease or other situation prohibiting you from working. Other terrors also await in unknown hiding places, ever ready to disrupt your meticulous financial planning for years in the future. Terrors like plant closings, downsizing, offshoring of your job, robotics and who knows what else. The point is this: everyone must begin to use every means they have as soon as they can to direct every possible source of income into their accumulated asset fund.

As a 20-year-old, soon-to-be college graduate you must immediately face these problems. And there is much more. Remember we began this article talking about coming changes in human longevity? No matter the many problems to be associated with this, the financial requirements are the most pressing and they are something you as a young person just entering your working career can do something about.

Right now you should be including these things in your plans:

• Plan for disability shortening your career
• Possibility of job termination due to causes beyond your control
• Provision for early retirement
• Current possibility of living 120 years
• Increasing life expectancy to about 88 years
• Possibility of normal retirement increasing to 80 years old
• Likelihood of ultimate maximum life span to 150 years

There are some immediate problems involved in working through these new obstacles. For one, most of the financial calculators won't take age calculations over about 75 years, and they are based on receiving benefit for another 30 years after retirement. That places a limit on these calculators of about 105 years—not nearly enough for the possible increased longevity. You can get around this by using the tools available on a site like this one. This site also has a present value calculator and several others that may be useful in your planning. You will find many similar sites using a Google search with keywords "financial calculators."

All financial planning requires focus and a strong dedication to your goals. Right this minute you may be able to say you can count on $1,000 to $1,500 in monthly Social Security benefits. But I never thought there would be any of this kind of money available and, like many people, I'm still not sure anyone will get anything in the future. At least you have to consider that the ultimate amount of benefits is at great risk right now as the US Congress, prodded by the President, debates the future of this program. Everybody should be frightened of the result.

So don't include much Social Security in your planning. And don't count on any inheritance either; your relatives will be living so long there won't be much left for you! You'll have to take care of your future pretty much on your own. Wealth accumulation is further inhibited by our general attitude toward saving. According to The Office for Social Justice average family 1998 wealth in the US was just $60,700, very much less than the $700,000 we calculated as the amount of accumulated assets you will need to stop working at age 70. This average includes everyone including Bill Gates, Warren Buffett, and the Waltons. Average Person has a lot of concentrated saving to do to secure his financial future.

At 20 years of age, a college student has other obstacles to initiating a fund accumulation program. Here are the major ones:

• A 20 year old expects to live forever and have plenty of time to save later.
• Good health of youth bodes no concern for disability in the future.
• There's no urgency to begin a saving program; I have 50 or 60 years before anything must be done.

Just on the surface none of these ideas is valid. To amass $700,000 or more you must begin right now. This necessary amount will grow larger through the years as you adjust for inflation and increased life expectancy. Every second you wait works against you because of the time-value of money. The sooner you put something aside to work for you, the quicker effects of compound interest will begin working for you. 

I'm a penniless college student, so how can I begin to accumulate anything?

The answer is that most students have discretionary money available from working, monthly stipend from home, or student aid. This may not be much, but you must realize there are thousands of Internet affiliate programs you can begin. Many are completely free but require some effort on your part in order to earn commissions for selling products. The better way to do this is to join a free program and scrape up about $125 each month to promote your program and enlist others to help you. 

An Internet affiliate business is an ideal way for any college student to begin preparing for a financial future. This kind of business overcomes the time obstacles everyone encounters because there is only a limited amount of time available to anyone so the amount any person can accomplish by themselves is very limited. Having others work for you as additional affiliates multiplies individual effectiveness in this kind of business. As a college student you have a flexible schedule so you can do the relatively small amount of work required as an affiliate and you also have about three years to experiment to find the best business for you. You have the advantage of not having to depend on this business for any of your required living expenses for about three years. This should be enough time for your sideline business to begin to be successful.

Of the many affiliate programs available, you are already involved with the best, IAHBE and Strong Future Marketing Group. My suggestion is to continue to build this one and perhaps pick up one or two others as you find them. It's always best not to depend only on one source of income.

Over the years your college business will provide ongoing income you can use to build your financial shield. It could become so good you will be able to support yourself entirely from your Internet home based business. Reinforce this idea by reviewing the many successful entrepreneur interviews in the IAHBE archives.

Whether in college or not, insure your future by starting your home based business at whatever age or stage in your life, even at 70 years of age!