Hired Any 65-Year-Olds Lately?

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James Ramenda, FSA, CERA, senior vice president at SS&C Technologies, Inc.

The reason I ask is that people are living longer but many haven’t saved enough to retire. The actuarial solution for this retirement gap is simple: More people will have to work beyond the “normal” retirement age. From an economic standpoint, however, this solution is not so simple.

1. White collar workers in their mid-60s may find a significant mismatch between the jobs available to them and the type of compensation that will maintain their lifestyles.

2. Mid-60s blue- and gray-collar workers may find the physical demands of continuing similar work to be difficult.

3. Everyone else may find that with this older working segment of the population struggling to maintain its lifestyle, overall economic activity could suffer—fewer job openings, less consumer spending, pressure on housing, etc.

As always, the economic data is subject to interpretation. The U.S. Bureau of Labor shows a shrinking pay gap between older and younger workers in the past few decades. Whether this reflects good news for older workers or bad news for younger workers is an open question. Moreover, the baby boomers are just entering “normal” retirement age. They will live longer and are less likely to have pensions compared to earlier cohorts.

Another dimension of the retirement gap that is worth discussing stems from the nature of the medical quest for longevity. Having been a caregiver for a 92-year-old parent, I’ve seen the health care system for the elderly up close and personal, including the medical wonders that have boosted longevity. However, as becomes obvious at advanced ages, the vast majority of these medical advances seem to have been targeted toward prevention and/or treatment of heart attacks, strokes and cancer, and not to the quality of life as indicated by physical and mental agility.

As I spent more time around assisted living and nursing facilities, it became obvious that progress with respect to musculoskeletal-related capabilities, dementia and Alzheimer’s, has not matched the increases in longevity. In fact, some of the effects of medication seemed to diminish physical activity and mental acuity, even as vital signs were kept in desirable ranges. It was striking to talk with people struggling to manage their medicine regimens, walkers, wheelchairs, oxygen tanks, etc., only to realize they were at the facility to visit their parents.

The actuarial aspect of this issue as I see it is this: unless medical science can achieve similar gains in areas like dementia, Alzheimer’s, vision, hearing, arthritis, osteoporosis, etc., as it continues to make strides in the fight against heart disease and cancer, it’s impossible to assume a commensurately longer working life span. So pushing back retirement age in an actuarial model may not be a practical nor fair solution at some point. For example, moving the Social Security retirement age to perhaps 70, as is currently being discussed, may just be creating a waiting period for many people—a kind of deductible, really. This is just cost-shifting, not an expansion the labor pool.

I believe actuaries need to use the retirement gap data to inform medical research, specifically to guide it more toward sustaining mental and physical agility, not just pushing the limits of longevity. We’ve pushed longevity to 100 and beyond. Do we need to go beyond 110 before we think in these terms? 120?

A system in which retirees take care of retirees is not sustainable. It’s been said that 50 is the new 40, but—keeping the same percentage—65 is not the new 52 in the workplace. Nor will it be until we are routinely hiring 65-year-olds for other than part-time jobs. For that to happen, we need advances in working longevity to catch up with age longevity.

Read the full article by James Ramenda in The Actuary as well as a letter to the editor in response to the article.  Join the longevity conversation and submit your comments here!

By James Ramenda, FSA, CERA, senior vice president at SS&C Technologies, Inc.

Reach James Ramenda at jramenda@sscinic.com.

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