Local Commentary

Guest Commentary: Increased Longevity Comes With Increased Costs

There is no doubt that as a society we have an obligation to provide an excellent education to our children; however, there are competing interests for the resources necessary to provide an excellent education. One of the competing interests that does not get much attention, is aging in America.

To give some context to what it means to be an American over age 65, consider that in 1880 there were 1.7 million people over age 65. In 2000 there were 34.9 million. In 1935, the year social security opened its doors, there were 42 workers per retiree; in 2011 that had changed to 3.3 workers per retiree and by the middle of this century there will be 2.2 workers per retiree. That is important because social security is primarily a pay as you go system; today’s workers are paying for those who have already retired. Today the life expectancy of a woman age 65 is almost 20 years and over the next 20 years the numbers of centenarians will more than double. Lastly, non-married women are much more likely to love in or near poverty than their married counterparts. Since women tend to live longer, they are the ones most likely to outlive their assets.

While Baby Boomers are likely to redefine retirement, they are also more likely than their parents to run out of money. Intellectual arguments about personal responsibility and lifestyle choices will give way to the very practical question: “What do will do with old these very old people who have outlived their resources?” Living to the 80s, 90s or even 100 increases the likelihood of experiencing debilitating chronic age related diseases such as osteoarthritis, macular degeneration and dementia or Alzheimer’s; 50% of people over 80 years old will develop Alzheimer’s. The very old will be at increased risk of disability and loss of function from chronic lifestyle associated illness such as diabetes, or coronary disease, respiratory disease and the yet unknown long term effects of recreational drug use and long term alcohol consumption. These diseases make safely living alone very difficult and may result in the need for some sort of congregate living arrangement such as assisted living or a nursing home. In addition to the normal living expenses, those needing congregate living will need an additional $300,000 for the last three to five years of their life.

Research indicates middle and late Boomers are poorly prepared for retirement.

Many octogenarians today have lived in the same house long enough to completely pay the mortgage and realize a healthy capital gain that can provide for late life congregate living. Many Baby Boomers will retire with mortgages or even second mortgages which will increase the burden on retirement savings and reduce the likelihood of accumulating housing wealth that can be used later in life.

One of the drives of moving has been changing jobs. Many of our parents stayed with the same employer for a long period of time and eventually became vested in a defined benefit plan. Today, in increasing numbers, defined contribution plans, 401(k), are the source of retirement income. Research conducted by the Center for Retirement Research at Boston College indicates middle and late Boomers are poorly prepared for retirement. Far too many people view Social Security as a primary source of retirement income rather than as a safety net.

Over the past decade, the gap between the middle class and the wealthy has widened. According to the Washington Post, in 2008, the top 0.1% of wage earners took in more that 10% of the personal income and the top 1% captured 20%. Combine the wage gap with a jobless recovery and it is easy to see how difficult it can be to accumulate enough money to last for 20 years on average and 40 years for some.

The good news may be that we are living longer. The bad news is that we are not financially prepared to live longer. The bottom line is that someone is going to have to pay for the increases in longevity. The public cost of aging is going to compete with the cost of education. As a country, we are going to have to figure out how to walk and chew gum because this is not an “either or” choice.

The entire world is aging and that is going to force us to redefine aging and retirement worldwide and especially in America. As the Baby Boomers (those born between 1946 and 1964) begin to retire they will find that their retirement will be different than that of their parent’s. The Baby Boomers have a reputation of having things their way and redefining every aspect of American life from music to marriage; from politics to religion. Boomers will o doubt change what it means to age and what it means to be old. However, as they move through retirement, the late retirement years may redefine the Baby Boomers.