The real demographic timebomb

Bonjour,

I am sure you have read multiple times about life expectancy and how it has been rising steadily over the last decades if not centuries.
I am in my early thirties today and if I were living two centuries ago, I would be enjoying the last year(s) of my life, on average. I do not know how I would be dying, but some kind of infection spreading to my limbs or some tuberculosis / smallpox would probably take me away pretty soon. Also, you may not find my smile very enticing.

rotten teethSay “Cheese”!

Life expectancy has risen so much that in major developed countries, it is now expected that there will be millions of centenarians by 2050. There are many consequences of this longevity which are heavily discussed – I will give you a few examples:
–          Productivity: as retirement ages are pushed back towards 70 or even beyond, I am wondering how productive will be a 75-year-old manual worker?
–          Pension: if people retire at 65 and live up to 100, they will need income for 35 years after contributing to their pension funds for 45 years. Can the retirement systems of most countries cope with that equation? Probably not under the current form!
–          Healthcare costs accelerate past the age of 75. Think of hearing aids, eye surgeries, heart conditions, hip replacements, etc. An aging population equals larger outlays. Can our health systems afford this outlay under current conditions? There again, this is unlikely.

Until now, forecasts of rising life expectancy have been welcomed mostly positively. We live longer as a result of progress. That must be good, or ist it?

lifeexpectancy

Progress looking better in blue

However, while life expectancy in Western Europe has steadily climbed, what has lagged this increase is the life expectancy in good health or as called by Eurostat, the EU statistical agency, the Healthy Life Years.
This is a very different concept which has major implications for our economies and for us as individuals.

Healthy Life Years, abbreviated as HLY and also called disability-free life expectancy (DFLE), is defined as the number of years that a person is expected to continue to live in a healthy condition. A healthy condition is defined as one without limitation in functioning and without disability.

If I take my home country, France, the latest statistics produced in 2013 showed that the HLY at birth in 2013 in France were 64.4 years for women and 63.0 for men. Compare this to the overall life expectancy of 85.6 and 79.0 years respectively. This implies 21.2 and 16 years lived not in good health! Do note that the HLY gap is much narrower than the overall life expectancy. Women, you will live longer but you will live more years in poor health.
In the US, this number, using the Eurostat methodology is closer to 61 years!
See how Malta score very well. Many some secrets of the Templar knights are relevant to good health. See how Switzerland perform poorly despite being a very wealthy country. I cannot resist highlighting the cigarette butts as the only litter on the pavement in Zurich as a proof that the Swiss have their little dirty bad habit.

HLY Europe birth 2013Greece beating Germany easily in a positive contest!

All this means that even if life expectancy has risen by a quarter of a year per annum in the last 20 years, you will be living on average longer in poor health. Would you like to live until 100 in bad health?
More importantly, will you be able to afford it?

The good (affordable) old days
If your life expectancy goes to 100 against 80 currently while your HLY stay at 65, the healthcare system will have to cover you for 35 years instead of 15. This is 2.33x more costs, without accounting for a worsening of ill health through time. We could guesstimate a cost multiplied by at least a factor of 3 times. Your health insurance premium may balloon as a result.
You would also have to be sure that your pension can withstand any downturn to avoid running out of money. In the past, it was possible to draw down 5% of your capital each year to meet your ongoing expenditures. In the future, given the low interest rates prevailing, you may be able to only take 3% (there is research showing that 3% is the new 5%). This means that to keep the same level of income, your egg nest will have to be two third bigger. Can you save an extra 67% today for your retirement?

Finally, in the Western world, older generations are used to take care of themselves financially. This could change as grand-parents cannot afford their retirements.

To sum up, unless governments come up very soon with new policies to encourage healthy lifestyles, you will need to take care of this problem by yourself: plan your retirement, save more and be healthier now rather than later. Then you should be able to afford living longer healthily.

The way it looks at the moment

Last week, I submitted to you a little enigma. I have a few good answers and the breakfast is set up.
The current leader of this global organisation is Argentine Jorge Mario Bergoglio, also known as Pope Francis. Yes, he was a bouncer shortly.
Yes, I was referring to the Catholic Church.

There are three main activities indeed: tourism in the Vatican (they make money out of you visiting the Sistine Chapel), operating the churches (which send some money back to Rome) and the financial services arm, named Institute for the Works of Religion.
It has around 420,000 priests, bishops, sisters, cardinals across the world. And as I said, there are uniquely only 5 hierarchy levels. You start as a priest, then can become bishop, archbishop, cardinal and then Pope. A pretty fast way to the summit if you so wish.

Since his appointment in 2013, Francis has cleared out the old workings of the Church and there are now more people entering the movement as clergymen or as flock.

That said, I am not advocating any religion but I always found interesting that multinationals have a life expectancy of 40 years while the religions have managed the tests of time, despite not being professionally managed.

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