Are We Underestimating Future Life Expectancy?
The International Monetary Fund asks what would happen if life expectancy by 2050 turns out to be three years longer than current projected in government and private retirement plans:
[I]f individuals live three years longer than expected–in line with underestimations in the past–the already large costs of aging could increase by another 50 percent, representing an additional cost of 50 percent of 2010 GDP in advanced economies and 25 percent of 2010 GDP in emerging economies. … [F]or private pension plans in the United States, such an increase in longevity could add 9 percent to their pension liabilities. Because the stock of pension liabilities is large, corporate pension sponsors would need to make many multiples of typical annual pension contributions to match these extra liabilities.
HT: Timothy Taylor in the Conversable Economist blog.
There are theories that babies born today may live significantly longer than our grandparents or even parents. Aubrey de Grey, a biomedical gerontologist and longevity expert, recently said in an interview the first person to live to 150 has already been born; the first person to live to 1000 is only 20 years behind.
I don’t quite yet buy the 1000 is “20 years behind”, only because human DNA may not be wired for that…….I may change my mind on that, however.
Funding pension/retirement plans is another crisis waiting for us in the next few decades.
Aubrey de Grey and his ilk are a little ambitious. Sonia Arrison wrote a book last year called “100 Plus” that addresses some of these issues.
However, even if 100 is the natural, biological limit to human life, if we are going to get to the point where the median lifespan is 100 our pensions and health systems will still be in huge crisis.
Look at how the American people and political class have reacted to increasing life expectancy since Medicare started in 1966. That hardly gives one confidence that we are going to address this problem properly.
Also, there is the iron law that old people vote and young people don’t, so the crisis gets worse because of this negative feedback loop: More people getting older make the problem worse, but they also make the politics worse because they motivate politicians to loot from productive, younger people and transfer their incomes to the elderly.
Combine that with the war on savings and investing that the left is currently winning (with taxes on capital gains and dividends about to increase), thereby circumscribing the potential for significant productivity increases, and we have a poisonous mix.