POWIP Piece of Work In Progress – Former Abode of Dan Collins

Reality Hitting: Demography, Retirement Ages, and New Jersey

Some months back, the magazine of the Society of Actuaries, the Actuary, ran an article about a supposed epidemic of dementia that was going to sweep over Canada (and the world in general). It was written by some Canadian consultant who was trying to get the government to pay for her services (at least, that's how I read it).

I did not react well to this article. The following is the screed I hastily tossed off to the editor:

A few remarks on this article in the recent issue of The Actuary:

First, a jarring phrase in the sidebar:

This accepting attitude has allowed governments to ignore their
plight and happily accept the $25 billion a year in unpaid labor

Oh, heaven forbid that family members care for each other, when "the government" should have been picking up the tab. Oh my, we care for our autistic son when he should be institutionalized. How dare the state expect me to deal with him.

Now, clearly some people do need care beyond the physical (and mental) abilities of family members, but the fact that people with mental disabilities can be difficult to live with does not mean that it's the responsibility of "the government" to make the difficulties of life go away. I think those who colonized Canada may have thought this sentiment odd; one did not go to Canada for the harshness of life to be worn away in the swaddling embrace of the state. And certainly one did not expect someone else to take on the responsibility of caring for one's aging mother. It was a duty to do so.

But that's just a side issue, distracting from the main thrust of the article. It's not clear to me that senile dementia is actually an epidemic in normal terms. I tried to look around for some statistics on dementia incidence by age and sex, and came across many articles and abstracts. Here are a few:

http://archpsyc.ama-assn.org/cgi/content/full/55/9/809

http://www.ahaf.org/alzheimers/dementia-in-extreme-elderly.html

http://www.sciencedaily.com/releases/2010/02/100224103353.htm

It seems that the issue is that dementia incidence increases with increasing age. There seems to be sex-differentials in types of dementia (for some reason women have higher incidences of Alzheimer's Disease, but men have higher incidence of vascular dementia). But in general the reason you have more female dementia sufferers is that more women survive to older ages, and older people have a much higher incidence of dementia.

So it seems that this "epidemic" is just a part of the larger mortality trends we see impacting retirement systems: people are living longer, and there are consequences to that. Yes, there is early-onset Alzheimer's Disease, but that forms a small percentage of senility issues.

And while the author gives recommendations that suspiciously sound like it would help her own organization (how convenient that I can click in the author bio and end up at her business's website), here is one of my own recommendations to help combat this issue:

Get people to work longer.

Source:
http://www.guardian.co.uk/society/2009/may/18/alzheimers-disease-dementia-retirement

To quote the linked article:

Working beyond normal retirement age might help stave off dementia, scientists said today.

Keeping the brain active later in life appears to reduce the chances of an early onset of Alzheimer's disease, according to a study of 382 men with probable dementia. The researchers suggest a significant link between later retirement and delayed symptoms.

....

The researchers found no link between education or employment and dementia risk, but found that those who retired later prolonged their mental abilities above the threshold for dementia.

Of course, it can be that those who will have earlier dementia retire earlier due to mental difficulties, but given that life expectancy past the old "traditional" retirement ages has increased greatly over the past century, it's just good public policy in general to encourage people to work well past what used to be the age of decrepitude but is currently an age of still quite good productivity.

Another recommendation is for people to have more babies right now. Because those caring for the elderly senile population when it swells over the next few decades due to demographic patterns already baked-in will be those born right now if they want strong, young backs to help physically.

Going back to my first point, while it has been considered the duty of family to take care of each other, due to dwindling fertility, and relatively high divorce rates, ultimately it will be non-family members providing a huge amount of care to the extent that these elderly will be cared for. So it would help if there are plenty of people to work in this sector.

Or perhaps Japan will have improved robotics so well that actual human beings will not be needed.

In any case, it doesn't help to look at this "dementia epidemic" as some discrete occurrence, as it is part of the same demographic issue currently roiling Europe and soon to hit North America as well (though our fertility rates haven't cratered as badly...at least not yet).

I do understand that this author is not an actuary. But if we keep on pushing the concept of actuarial work as embracing risk management in a global sense, it does us no good to look at a problem as some isolated issue when it is part of a larger trend that is impacting so much.

I may have been a trifle exhilarated when I wrote it. In any case, the magazine printed it (pages 8-9) without many edits.

But this is a major point that many miss: people are living to much older ages now in huge numbers, and they didn't have many kids (and then there is the increasing percentage of childless women). This is going to have a huge effect on retirement and long-term care possibilities, even for the Boomers. The demographic crater will have an impact well before my generation becomes decrepit.

There needs to be a readjustment of expectations for everybody, in terms of what is feasible.

Consider the multifarious impacts of retirement age. In this analysis by Bill Zettler, retiring at age 55 compared to age 65 increases a pension cost by almost 70% by itself. The current issue of the Economist has an entire section on retirement, pensions, and public finance - their editorial accompanying the feature indicates that our retirement age expectations are still way too low.

But wait - good news! Because the economy sucks so bad, Boomers have had to readjust to the reality, and no matter what they had planned on, realize they may need to work to higher ages. If you want a wonkier overview of the issues, here's a presentation from the American Academy of Actuaries on retirement issues from a Capitol Hill briefing yesterday.

But let's make it concrete. Consider the sad case of NJ pensions. Actuary John Bury's latest post is titled The Obvious Answer to New Jersey’s Pension Mess :

Scare the retirees to death.

At least that’s what it looks like when New Jersey’s Senate president Stephen Sweeney tells retirees they could see their pensions cut by two-thirds without reforms.

The bizarre part is he’s absolutely right…..though I don’t think he really believes it.

If every retiree, current and future, had their benefits reduced by two-thirds it would indeed save the plan since the contributions are averaging about one-third of what they should be. But who would sign up for this solution?

John calls it scaring the retirees; I call it managing expectations.

A year ago, I explained how one can fulfill long-term financial promises, and how, if they're not prepared for, the promises will not be kept. People need to know as early as possible how realistic their expectations are. The various hissy fits being thrown by public unions are denials of this reality, and a refusal to admit that their expectations will not be met.

Because they won't.

If nothing else, other than not having enough rich to tax, there aren't enough people, period, to support an increasing number of non-working adults. You didn't have enough kids, Boomers. There will be consequences to that. Sucks to be you.

But hey, if you work to older ages, you can stave off some senility! Win-win!

Meep

Meep is a member of the Irish Catholic mafia, having a suspiciously high number of green-eyed, red-haired friends. While she doesn’t have red hair herself [except when she goes into the sun (rare for any vampire)], she does have green eyes. She’s a raving Papist and is a life actuary on the side [i.e., she counts dead people]. An amateur pain-in-the-ass [willing to go pro!], she likes covering retirement, mortality, math, and education issues.