Global aging threatens to lay waste to your retirement plan. Here's why you need to stay healthy and write your congressman.
By Dan Kadlec
April 26, 2012 | TIME
President Obama will host the G-8 nations next month at Camp David, and while it’s not clear exactly what will be on the agenda, it seems one thing won’t be: global aging, which — among other things — happens to be the mother of all retirement issues.
In the rapidly approaching future, aging populations from Japan and China to most of Europe, Brazil and the U.S. will reshape public policy and begin to weigh on the world’s financial system and growth prospects. As a result, global graying promises to change the face of retirement everywhere as countries come to grips with the escalating costs of caring for so many elderly.
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The upshot: You’ll work longer. You’ll have fewer benefits and higher tax rates. You’ll be incentivized to live a healthier lifestyle, and you’ll be asked to stay in the game and give something back when you finally do call it quits for good at 75 or 80. It’s simple math. People are living longer and we are having fewer babies. There will not be enough young to support the old.
Much of this is widely known, of course. Still, the numbers can be startling. The World Health Organization reports that around the globe:
• The number of people 60 and over has doubled since 1980.
• The number of people 80 and over will quadruple to 395 million by 2050.
• Within five years, the number of people 65 and over will outnumber children under 5.
• By 2050, older adults will outnumber children under 14 and more than 2 billion people will be 60 or older.
Writing in the Washington Post, Michael Hodin, executive director of the Global Coalition on Aging, asks:
“Can it be a coincidence that, under the weight of this demographic transformation, the 20th century’s social contract is coming apart at the seams? With Greece, Ireland, Portugal, Spain and a number of U.S. states facing huge budget challenges, the consequences of applying last century’s economic and social policies to today’s demographic realities are stark.”
Hodin wants global aging on the G-8 agenda. He says we should be putting on a full-court press to promote pathways to healthy, active and productive aging before the elderly go begging or bankrupt us all. Profound change is needed to transform our expanding population of 65-year-olds from a liability into an asset—and so preserve the concept of retirement, if at a later age.
Global aging may not have the urgency of things like transition in Afghanistan, missile defense systems and the blockade of rogue states (as are on the summit agenda, for sure). But it’s a bell ringer nonetheless.
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According to the National Bureau of Economic Research, population aging threatens global financial markets as the massive baby boom generation, which amassed assets for 40 years, spends them in retirement. According to an NBER study:
“When there is a large cohort such as the baby boom, there may be more demand than usual for corporate stock and other assets while the cohort saves for retirement. This demand may abate after the cohort retires. Some analysts believe that the rise in stock prices in the 1990s can be partially attributed to this, and have forecast sharp declines in asset prices in coming decades as boomers sell their assets to the smaller baby bust generation.”
A report out of South Korea notes that by 2050 the average age of its population will be 54, making it the world’s most elderly nation. The government there is looking at sweeping change, not just to keep older people healthy and working but also to promote fertility and to try to mitigate the demographic shift. The country is looking at wider social service reforms including subsidized childcare and family allowances. According to the report:
“Researchers found that there is a positive correlation between social investment and fertility rates. This means that women tend to have more children and contribute to the labor market at the same time when there are more social programs available.”
A report out of the U.K. notes that the elderly are fast increasing pressure on healthcare and social services budgets and that the key aim of government should be to encourage people to remain active, and engage in regular exercise and refrain from behaviors that are bad for their health. Personal savings is another hot spot. Societies must save to be able to allocate funds for investment for the future, in such things as factories, offices, transportation, schools, energy and hospitals. From the report:
“If older people don’t save or run down their savings while a smaller working age population does not save enough to compensate for the shortfall, then a shortage of savings could seriously affect economic performance.”
“What if we re-imagined what it means to age? What if middle age were 55 to 75? What if we enabled our innovations and technologies to position aging populations to drive economic growth? What if we redesigned the education process so it accounted for our longer life spans? What if we dedicated basic research-and-development funding to Alzheimer’s and cardiovascular disease, to vision deterioration and bone frailty? What if we followed the Global Network of Age-friendly Cities and Communities, where housing, transportation, social services and education are aligned to aging populations?”
Only then will a decent retirement be a realistic goal for most people in the decades to come. But these are not the kinds of changes that individuals or even institutions can bring about on their own. It will take governments working together out of common need. It’s a lot to expect. We might as well get started.
Read other related stories about this:
• G-8 should tackle issues of aging The Washington Post
Find this article online at: http://moneyland.time.com/2012/04/26/how-to-stop-a-slow-motion-disaster-learning-to-live-with-global-aging/.