Let’s talk about longevity
The Economist “surveys” are great, and the one on Longevity here is no exception. TL;DR – We are living longer than ever – which is beautiful, empowering, just, and also a financial headache. In the 1800s, no country had average longevity more than 40. Now, it’s flipped. There is no country that DOESN’T live that long. Those of us who are educated and healthy, are living in a truly blessed and charmed life. Go ahead, be thankful.
We are getting older
The developed world (and China) are getting grey quickly. The percentage of people over 65 in the OECD was 16% in 2015, and will be 25% by 2050. While that does not sound like a lot, this creates a ripple affect in everything – the economy, family dynamics, resource usage etc.
We are living longer, healthier lives
The report notes some miraculous achievements:
- Britain, which had just 24 centenarians in 1917, now has nearly 15,000
- In America today a 70-year-old man has a 2% chance of dying within a year; in 1940 this milestone was passed at 56
- Today in the rich world 90% of the population live to celebrate their 65th birthday, mostly in good health
- Today babies born in the West can expect to see their grandchildren have children.
This is creating an old vs. young imbalance
Globally, a combination of falling birth rates and increasing lifespans will increase the “old-age dependency ratio” (the ratio of people aged 65 or over to those aged 15-64) from 13% in 2015 to 38% by the end of the century. Fewer young people to help support, pay the pensions, and care for older people.
In 2017, the peak cohort of American baby-boomers turns 60. As they approach retirement in unprecedented numbers, small tweaks to retirement ages and pensions will no longer be enough. This is a massive concern in the US, as healthcare costs are 2x the average OECD per capita spending, and more people are going on Medicare (government paid healthcare)
Is 60 really “old”
Not really. When people lived to 50 years old (think: US in 1900), then 60 was rare. Now people live a lot longer and beautiful healthy lives. People are super productive into their mid-high 80s. Perhaps we need new words to describe the stage of life between the end of the conventional working age (60?) and the onset of old age as it used to be understood. We are working longer, more part-time, more money, used flexibility,
The Economist quips, perhaps we should call them OWLS (Older, Working Less, Still earning).
Just like the naming of “childhood” and “teenager” created a greater awareness of that particular age group, challenges, and opportunities. . .so too do we need a better way to describe the age between 60-80. Remember, a LOT of people work past the age of 60 years old. Some examples?
- Gig economy – 1/4 of the Uber drivers are over 50 years old. Interestingly, millennials like flexible work – which might be a good precursor to a more flexible work force 40-50 years from now.
- Startup generation – In Brittan, 60% of those over 70 years old are self-employed.
- Slower, but more accurate – Deutsche Bank noted that in operations, older workers were not as fast, but they were less prone to mistakes. Also, they do very well on multi-generational teams.
Ageism is real
In one American study of 40,000 resumes, the ones with people over 65 years old with the same qualifications for a low-skilled job were 35% less likely to get call backs. Traditional employers need to get rid of seniority-based benefits and perks – which encourage the early retiring of “expensive” workers, and unduly burden the enterprise with overhead.
Age gains are unequal
Education level is correlated with longevity. There are many reasons: less obese, less smoking, less alcohol and drugs. Less air pollution and other factors. Also, educated people tend to have more cognitive jobs, which can be performed through older age. Knowledge work lets people work longer. For example, an insurance company, WAHVE, hires underwriters in their 70s and 80s. As far as this argument goes, education is a good health thing.
More women living alone: As folks get older, it is not equal by gender. Women are more likely to live longer (average of 5 years older in the rich world), and more likely to be single. In fact, in Europe, women over 65 are more than twice as likely as men to be living alone. Why is that? Remarried to younger (less than 65 years old) women or otherwise?
Lots of unpaid work
Grandmas hold up half the sky. In Italy, 1 in 5 grandmas provide daycare for children 5 days a week. Mamma mia. Also, elderly people perform lots of volunteer work. In the US, they contribute 3.3 billion (yes, billion with a B) hours of work.
Silver dollar opportunity
Seniors have time, money, and interest. They are an under-served market. Over 60s adventure travel. The divorce rate of couples over 60 years old, is double what it was in 1990s. A quarter of the profiles on match.com are between 53 and 72.
Global spending by households headed by over-60s could amount to $15tn by 2020, twice as much as in 2010, predicts Euromonitor, another market-research outfit. Much of this will go on leisure.
Financial planning is outdated: The 3 stage model or school, work, retirement is outmoded. People under-save while working, then under-spend later in life. Often-times, older people are net savers during their retirement. Naturally, this is not good for the economy (C+I+G+NX).
Roughly 40% of Americans approach retirement with no savings at all in widely used retirement accounts such as IRAs or 401(k)s. Yikes.
Long-term care: This seems to be the wild card. It is expensive and the majority of people will need some type of long-term, assisted-living. This insurance product has been around for a while – but companies have not done well with it (people living a long time, low bond-yields), and people don’t purchase it when they are early enough. The public options are not much better. Apparently, Alzhiemer’s is the #1 reason people need long-term care. 47M currently have it, and they predict that number will go to 132M by 2050.
Reverse mortgages: One potential answer for a shortage of assets is to “get rents” from the bank on your house while you are alive (the bank gets it when you pass away). Unfortunately, there are not many companies offering this product, there have been scandals in the past, and the rates are too high. Dave Ramsey advocates against them.
Technology helps: With the internet of things, it is possible to better monitor people and prevent accidents from happening (e.g., stoves left on), or reduce their impact (e.g., Lifeline is used by 750K Americans). Also, Uber and delivery services become super convenient for those who find it hard to drive.
What’s the downside?
Okay, so I’ve written 1,100+ words about the miracle of technology, trade, wealth creation, education, and magic that has led to increased longevity. Collectively, we are living longer, healthier lives. No complaints here.
The challenge is that we may be under-investing in youth. More elderly people, living a longer time, with higher expectations of quality of life, and what they are entitled to (pension, promises made by the government), coupled with the decrease in family support = greater government deficits.
Hate to end on a down-note, but this is a super powerful TED talk about Scott Galloway, professor at NY Stern. The title is provocative and it should be. Namely, are we old people (yes, I put myself in that category, born 1971) mortgaging the future of the next generation?
