Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Junior Gold Mining Stocks Setting Up For Another Rally - 22nd Jan 20
Debt the Only 'Bubble' That Counts, Buy Gold and Silver! - 22nd Jan 20
AMAZON (AMZN) - Primary AI Tech Stock Investing 2020 and Beyond - Video - 21st Jan 20
What Do Fresh U.S. Economic Reports Imply for Gold? - 21st Jan 20
Corporate Earnings Setup Rally To Stock Market Peak - 21st Jan 20
Gold Price Trend Forecast 2020 - Part1 - 21st Jan 20
How to Write a Good Finance College Essay  - 21st Jan 20
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20
Stock Market Final Thrust Review - 19th Jan 20
Gold Trade Usage & Price Effect - 19th Jan 20
Stock Market Trend Forecast 2020 - Trend Analysis - Video - 19th Jan 20
Stock Trade-of-the-Week: Dorchester Minerals (DMLP) - 19th Jan 20
INTEL (INTC) Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 18th Jan 20
Gold Stocks Wavering - 18th Jan 20
Best Amazon iPhone Case Fits 6s, 7, 8 by Toovren Review - 18th Jan 20
1. GOOGLE (Alphabet) - Primary AI Tech Stock For Investing 2020 - 17th Jan 20
ERY Energy Bear Continues Basing Setup – Breakout Expected Near January 24th - 17th Jan 20
What Expiring Stock and Commodity Market Bubbles Look Like - 17th Jan 20
Platinum Breaks $1000 On Big Rally - What's Next Forecast - 17th Jan 20
Precious Metals Set to Keep Powering Ahead - 17th Jan 20
Stock Market and the US Presidential Election Cycle  - 16th Jan 20
Shifting Undercurrents In The US Stock Market - 16th Jan 20
America 2020 – YEAR OF LIVING DANGEROUSLY (PART TWO) - 16th Jan 20
Yes, China Is a Currency Manipulator – And the U.S. Banking System Is a Metals Manipulator - 16th Jan 20
MICROSOFT Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 15th Jan 20
Silver Traders Big Trend Analysis – Part II - 15th Jan 20
Silver Short-Term Pullback Before Acceleration Higher - 15th Jan 20
Gold Overall Outlook Is 'Strongly Bullish' - 15th Jan 20
AMD is Killing Intel - Best CPU's For 2020! Ryzen 3900x, 3950x, 3960x Budget, to High End Systems - 15th Jan 20
The Importance Of Keeping Invoices Up To Date - 15th Jan 20
Stock Market Elliott Wave Analysis 2020 - 14th Jan 20
Walmart Has Made a Genius Move to Beat Amazon - 14th Jan 20
Deep State 2020 – A Year Of Living Dangerously! - 14th Jan 20
The End of College Is Near - 14th Jan 20
AI Stocks Investing 2020 to Profit from the Machine Intelligence Mega-trend - Video - 14th Jan 20
Stock Market Final Thrust - 14th Jan 20
British Pound GBP Trend Forecast Review - 13th Jan 20
Trumpism Stock Market and the crisis in American social equality - 13th Jan 20
Silver Investors Big Trend Analysis for – Part I - 13th Jan 20
Craig Hemke Gold & Silver 2020 Prediction, Slams Biased Gold Naysayers - 13th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

You Will Probably Live Longer Than You Thought—But Can You Afford To?

Personal_Finance / Pensions & Retirement Dec 21, 2018 - 05:40 PM GMT

By: John_Mauldin

Personal_Finance

I have long warned that demographic changes have made Social Security unsustainable.

In 1940, the Social Security system had 159.4 workers per beneficiary. Then it went off the rails quickly. By 1945 the ratio was down to 41.9 and a decade later was in single digits.

We usually think this is a result of the Baby Boom generation turning 65, and that’s a big part of it. But rising life expectancy is equally and maybe more important.


People now live longer, which lowers the ratio and means they collect more years of benefits than previous generations.

Let’s stop here and think about this “retirement” concept.

Retirement As We Know It Doesn’t Make Sense

Retirement is a relatively new thing. For millennia, the idea that a physically able person of “non-royal” blood would simply stop working and enter a life of leisure was unthinkable.

You worked as long as you could, declined quickly, and then died. Very simple and financially sustainable most of the time.

It was no coincidence that retirement developed along with the Industrial Revolution. Technology made food production far less labor-intensive. This reduced the need for less productive, older people to contribute.

Societies around the world decided to let the oldest members take some final time off before their end. A good and humane practice, I think. However, it has limits.

When the retirement systems were created, nobody thought that average people would spend the last 30% or 35% of their lives at the broader society’s expense. They would’ve thought that was nuts!

And yet we are trying to do it. No surprise, the seams of our retirement dream are beginning to unravel.

The Retirement Age Is Lagging Behind

The problem is not simply that there are so many Baby Boomers. It is that we have so many Baby Boomers and they’re living longer than previous generations did.

In 1950, 8.4% of the US population was over 65, and 1.2% was aged 80 or above. In 2000, the 65+ share of the population went from 8.4% in 1950 to 12.3% in 2000.

But wait, that’s not all.

If the projections are right, then in 2050 some 22.3% of the US population will be over 65 and 8.3% will be over 80. Both would be huge increases since 2000…

But I think the estimate is probably wrong, and not in a helpful way. You see, these estimates don’t include the age-extending technologies that I believe are coming in the next decade.

That means by 2050 the working-age population will be less than half the total. And yet it has to support its children and elders? I don’t think so. Something will break first.

The most likely scenario is readjustment of “working age” at the upper end. The current retirement age is rooted in times when few people lived that long. And most of those who did were physically incapable of going much longer.

That is rarely the case now. I’m knocking on 70 and still work as full-time as I ever did. And I’m surrounded by friends my age and older who are just as active or more active than I am.

To reflect rising life expectancy and better health, the retirement age should have been raised beyond 70 years ago. People would have had time to to plan for it. That didn’t happen, so now we have to scramble for solutions.

Will We Afford Living Longer?

Preparing for retirement would be far simpler if you knew in advance when you would get sick and die. That means you must either:
  • Save too much and possibly check out with a surplus, or  
  • Outlive your savings, then fall back on Social Security and the kindness of family for your final years.

The first option is obviously better, but is it unfeasible for most people. A surprising number of people die in debt.

Longer lifespans make this harder. Say you finish your education and start making money at age 25. If you retire at 65, your career was 40 years.

During that time, you had to buy a house, help children with college, maybe repay your own student loans, and otherwise live a normal and hopefully comfortable life. You used whatever was left for retirement savings.

Now, is it mathematically possible to save enough in those 40 years to fund another 30 or 40 years of retirement? Probably not.

Sure, you might build a business or invent a new technology. But the average working person can only save so much of their income. And basic retirement living costs will consume most of it in less than 30 years.

This is what my British friends call a “sticky wicket.” The good news is we will soon be living longer. The bad news is we will soon be living longer.

Since the technology is coming regardless, we need ways to reconcile the costs and benefits. However, it is not at all clear how we will do so.

Join hundreds of thousands of other readers of Thoughts from the Frontline

Sharp macroeconomic analysis, big market calls, and shrewd predictions are all in a week’s work for visionary thinker and acclaimed financial expert John Mauldin. Since 2001, investors have turned to his Thoughts from the Frontline to be informed about what’s really going on in the economy. Join hundreds of thousands of readers, and get it free in your inbox every week.

John Mauldin Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules