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M. Todd Henderson is the Michael J. Marks Professor of Law at the University of Chicago Law School, where he researches corporations, securities regulation, and law and economics. Before academia, he worked as a civil engineer, clerked for a federal appellate judge, practiced law in Washington, D.C., and worked as a management consultant at McKinsey & Company. He has taught at the University of Chicago for 20 years.
Henderson described how retirement systems have shifted from defined benefit pensions, like the one his grandfather earned as a coal miner, to defined contribution 401(k) plans, which offer market upside but shift longevity risk onto the individual.
He shared that his father, who saved diligently in a 401(k), spent his final years anxious about outliving his savings, even after his financial advisor told him repeatedly that his money would last, an example of what Henderson called longevity risk.
By contrast, he said his grandfather's pension pooled longevity risk across coal miners, so he never worried about running out of money, though the monthly benefit was comparatively modest since it wasn't invested in the broader market.
He said the earlier someone starts saving, the more they benefit from compounding, and noted in hindsight that he wished he had saved more in his 20s rather than later in life.
He referenced modern portfolio theory, the idea that broad diversification, owning a wide slice of the market rather than picking individual stocks, tends to produce better risk-adjusted outcomes over time.
He noted that lower-income and underbanked individuals often face practical barriers, like account minimums, that keep them out of traditional investment products.
What is longevity risk, as Henderson described it?
Henderson described longevity risk as the fear of outliving one's savings, something he said his father experienced acutely in his 80s despite having enough money, according to his financial advisor.
How did Henderson's grandfather's pension differ from his father's 401(k)?
He said his grandfather had a defined benefit pension that pooled longevity risk across coal miners and paid a fixed monthly benefit for life, while his father's defined contribution plan offered market upside but left him managing a fixed pool of savings on his own.
What did Henderson say about diversification and stock picking?
He pointed to modern portfolio theory, the idea that owning a broad slice of the entire stock market, rather than trying to pick individual winning stocks, tends to produce better risk-adjusted returns over time.
What did Henderson say about access to retirement savings tools for lower-income workers?
He said many lower-income and underbanked workers face practical barriers, like account minimums, that keep them out of traditional investment products.
This article summarizes views shared by Todd Henderson in this interview and does not constitute financial, tax, or investment advice. Consult a qualified financial professional before making retirement planning decisions.
Disclosures
The information on this page is provided for educational purposes only and is not intended as investment, legal, or tax advice. It is designed solely to illustrate how longevity-linked investment benefits may work under certain assumptions. Actual results will vary. All illustrations, examples, and case studies are hypothetical and are intended to demonstrate potential scenarios — not to predict or guarantee actual outcomes. They do not represent the performance of any individual investor, portfolio, or account.
Key Assumptions Used in the Illustrations
Life expectancy and mortality projections are based on the most recent Social Security Administration (SSA) tables available at the time of simulation.
In the event of death or early withdrawal, hypothetical scenarios assume that investors who exit early, or their estate in the event of death, may receive 75% of the lesser of the initial investment or current market value, plus 1% for each full year the account was active. Case studies assume standardized market growth of 8% annually and do not incorporate unexpected market volatility, inflation, changes in interest rates, or changes in an investor's personal circumstances.
Simulations may assume a 3% annual early withdrawal rate prior to payout or death. All figures shown are net of fees. No forecast, projection, or hypothetical return should be relied upon as a promise or representation of future performance.
Past performance is not indicative of future results. The 8% annual market growth rate used in illustrations is a standardized assumption for modeling purposes only and does not represent the historical or expected performance of any specific investment. Note that early or voluntary withdrawals by other participants can affect fund performance and the size of distributions, and that a higher-than-expected number of participants reaching payout milestones may reduce the per-participant benefit received.
Savvly's Longevity Benefit is not a bank product, not FDIC insured, not insured by any federal government agency, and not insurance; payout amounts are not guaranteed. Investment values may decline..
Savvly's Longevity Benefit may not be suitable for all investors. Eligibility to invest is subject to qualification requirements and not all investors will be eligible. Investors should carefully consider their investment objectives, risk tolerance, time horizon, and financial situation before investing. See savvly.com/disclosures for current eligibility criteria, fees, risks, withdrawal terms, and fund assumptions.
This content is published by Savvly, Inc. Savvly has a financial interest in the products described and this content should not be interpreted as independent financial research or analysis. Investors should carefully evaluate their own circumstances and consult a qualified financial professional before making any investment decision.
