Ric Edelman is a financial advisor, radio host and author of nine books on financial planning. His most recent book is “The Truth About Your Future: The Money Guide You Need Now, Later, and Much Later.” In it, Edelman details how fast-growing technological innovation will change how American workers today need to approach their retirement plans, investing portfolios, college educations and future careers.
Edelman argues that the traditional lifecycle — go to school, get a job, retire — will be replaced with one that includes lifelong learning, interspersed sabbaticals and semi-regular job changes. The classic concept of retirement will fade as workers live longer and healthier lives, choosing to continue earning an income into their 80s, 90s and even 100s. It’s a bright and exciting future, Edelman says, and one with fantastic implications for financial planning.
Edelman spoke with U.S. News about his predictions for the future — and how technology will impact our finances. Answers have been edited for length and clarity.
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Readers probably don’t expect to pick up a personal finance book and learn about exponential technologies, innovations, startups and science. What do these subjects have to do with financial planning?
These subjects matter because the impact of exponential technologies is going to affect every aspect of our lives, with huge implications for our personal finances. Nanotechnology, biotechnology, bioinformatics, 3-D printing are all having a tremendous impact on life expectancy and quality of life. Now, according to the American Society of Actuaries, life expectancy is 88, but over the next 15 years, life expectancy is likely to rise to 110, 120 [years old].
That sounds crazy.
Yeah, it’s hard to fathom. It really is. And that affects everything. If you’re thinking of retiring at 55 and dying at age 95, what happens if you live to 110 or 120? Financially, most people would never be able to afford a 60-year retirement. And that’s the beginning of how we must reevaluate our future. If we’re not going to retire at 65, does this mean that we have to work forever? It doesn’t. Instead it’s going to alter the nature of work because while we are going to need to generate an income longer than we thought, it doesn’t mean that we’re going to work a 40-hour workweek the way we have in the past.
The gig economy, also called the shared economy, is developing rapidly. We already have one-third of Americans making money in some way or other through the gig economy, and these are people doing everything from renting a room in their house through Airbnb to driving a few hours per week for Uber to providing handyman services.
But at the same time, robotics and artificial intelligence are going to eliminate about half the occupations in America. In my book … I list 175 occupations that are going to disappear over the next decades, so we have to undergo retraining. It’s important for people to determine first: Is my job at risk for obsolescence to technological innovation?
In the course of writing and researching this book, did you make any changes in your own life to accommodate what you see coming down the pike?
Yes, my wife and I have made a number of changes in very substantial ways.
For example, I just got a new car a couple of months ago. And I did not buy it. I leased it. We’ll never buy a new car again. There is no reason to buy an automobile. Automobiles are increasingly becoming like computers. And they are becoming obsolete very rapidly. Just like you will replace your smartphone every couple of years, you’ll want to replace your automobile every couple of years because of the safety systems and the technological capability. And at the same notion, used cars will have virtually no value. Just like you would never want to buy a 2-year-old smartphone, you’d never want to buy a 2-year-old automobile.
And so we no longer advise our clients to buy automobiles. Instead, for now, lease them, and in the future, I’m not even sure we’ll be doing that. In the future, I think we’ll just be engaging in ridesharing services like Zipcar and Uber.
From a lifestyle perpsective, we have a fractional ownership of a beachfront property that, in the past, we never would have had the opportuity to do that. In the past, if you wanted to own a beach house, you had to buy the whole house and have all of the maintenance work obligations associated with it. Now there are vacation clubs and fractional ownership programs that we participate in that give us all the benefits of high-quality resort properties without any of the hassles of ownership.
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Do you think someone reading this book at age 30 will take away a different lesson than someone reading it at age 60?
I think that people in their 30s intuitively understand this far better than people in their 60s. According to the Department of Labor, the average 35-year-old has already had eight jobs. So I think millennials, who are in their 20s and 30s, are more easily able to acknowledge the changes that are coming, and for them it’ll feel more natural.
For people in their 60s, this subject can be a little unsettling because they were anticipating retiring within the next several years, and now they’re just beginning to discover that that might not be what their future holds. And the notion of changing careers or learning new skills can certainly be daunting, so it can take a while for people who have never before been exposed to these concepts to digest them and absorb them and frankly come to terms with these ideas.
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You say people will be saying, “Ridiculous!” as they read your book.
Yes … when I talk about these ideas and I do seminars and presentations, it’s very common for people to approach me saying, “That’s never going to happen,” or “It’s never going to happen in my lifetime,” or “It’s not going to happen for 50 years.” It’s common for the initial reaction to be denial.
Well, it seems so far out. It sounds a bit like science fiction.
Right, and it’s all the nature of exponentiality. It’s not that the future isn’t coming. Everybody agrees that the future is coming. It’s just the speed that shocks people.
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How Technology and Innovation Will Affect Your Financial Future originally appeared on usnews.com
