A ‘catastrophist’ says longevity poses huge risks we aren’t dealing with.
By Michael Grunwald
Human beings are living longer than ever, which can be a wonderful thing. As the T-shirts say, life is good. But human longevity has big consequences for society, which is one reason President Obama is hosting today’s White House Conference on Aging. It’s great that we can get new hips when our old ones wear out, but someone has to pay for them. It’s great that Baby Boomers will enjoy longer retirements, but will their retirement savings last as long as they will?
Most of us think of longevity as a gift, a blessing, a sign of social progress. Gordon Woo thinks of it as a catastrophe.
Dr. Woo, a Cambridge-trained mathematician and MIT-trained theoretical physicist who now works for the London-based consultancy RMS, spends his days thinking about catastrophic risks. Woo is one of the world’s best-respected “catastrophists,” and RMS—short for Risk Management Solutions—helps insurers and reinsurers calculate the likelihood of disastrous earthquakes, hurricanes, droughts, terrorist attacks, financial crises, and other hazards. Lately, Woo has been thinking a lot about the risks posed by climate change, which could have a huge impact on the catastrophes of the future, altering sea levels, weather patterns, migration patterns, and much more. But Woo’s other major preoccupation these days is the risks posed by people living longer.
Unlike some futurists, Woo does not believe the aging of the population is going to plateau any time soon—not in an era when you’ll be able to replace more of your spare parts and take the drugs that work best for your personal genome. And that could have huge implications in the coming decades, as civilizations struggle to meet the medical and financial needs of their elders.
In the United States, for example, Social Security is now in pretty solid shape, and Medicare’s troubled finances have improved significantly in the last few years, as health care costs have stopped soaring. But the picture could look very different over the next quarter-century, as the portion of Americans over the age of 65 rises from 12 percent to 20 percent. In 1960, there were five American workers for every retiree, but now there are just under three, so Social Security no longer generates surpluses. By 2040, there will be about two workers per retiree, a demographic cliff that could drain the system in a hurry—or force some dramatic changes. And the days when most Americans spent their entire career with the same company and then enjoyed a private pension during retirement are long gone.
New Jersey governor Chris Christie and other Republican candidates for president have called for reining in government entitlements; Jeb Bush has suggested the retirement age may have to be raised to 70. Meanwhile, Elizabeth Warren and other Democrats have talked about making Social Security benefits more generous, to ensure they can provide a high quality of life throughout an extended retirement; in her economic policy speech this morning, Hillary Clinton talked about “defending and enhancing Social Security.”
Woo talked to POLITICO’s Michael Grunwald about what he’s learned about old age—not only its consequences, but what kinds of people are most likely to achieve it, what kinds of medical advances are and aren’t likely to prolong it, and what it will mean for our public and private finances when living into our 90s is the norm rather than the exception.
MG: You have the coolest title ever: “catastrophist.” And you’ve written that the coming longevity catastrophe has a lot in common with the coming climate change catastrophe.
GW: Longevity has two important facts in common with climate change. They are both going to develop gradually over time. And because the attention span of human beings tends to be fairly limited, they are both issues that generally get put on the back burner.
MG: Can you explain why longevity is bad?
GW: At RMS, we’re focusing on the pension retirement sector, and it’s really underfunded in terms of its provision for increasing lifespan in the decades ahead. One reason is that when it comes to making provisions for longevity instead of ecological or geological catastrophes, regulators tend to be fairly light of touch. There’s good reason for this. If a corporation seems to have a black hole in its pension fund, it may not be a good policy to force the corporation to pump more money into the fund while it’s going through hard times, because that very act could draw the corporation into insolvency. That’s why regulators, even if they spot the problem with the pension fund, are often reluctant to force measures to remedy the situation. Often the thinking is, times will get better, corporations will get out of trouble, hopefully everything will be rosy in the future. But that will not be the case.
MG: How much longer are people living? Is this trend going to accelerate going forward?
GW: There is one view within the actuarial community that it might be leveling out—medical discovery is plateauing, it’s getting harder to discover new drugs, there are diminishing returns, that kind of thing. But that perspective doesn’t allow for the expansion of research into whole new territories such as regenerative medicine and anti-aging.
MG: But that’s not going to make people nervous. That’s going to make them excited, right?
GW: They don’t really see what the implications are.
MG: When you’re talking about regenerative medicine, you mean people picking up spare parts as they get older. My mom just got an excellent new hip.
GW: The basic paradigm is automobiles. You can have an automobile which was built 50, 60, 70 years ago, and if you keep repairing or replacing broken or used parts, that automobile can keep going for a very long time. Right now, if you have some disease or failed organ or system, you might have to resort to some kind of a transplant, say a liver transplant or heart transplant. But in the future there should be the possibility of replacing these organs or actually re-growing these organs. Ray Kurzweil, Google’s chief engineer, is advocating a whole new world of 3-D printing, where you can print out an organ in the same way you can print out a sheet of paper. That’s a future where you can maintain an individual for a very long time. Of course, the brain is something else but the rest of the body in principle could be replaced. Just as if you have an emotional attachment to your car, even if the gearbox breaks or you need new tires or a new transmission, you can pretty much can keep that car on the road in perpetuity.
MG: In the last century, how much has longevity increased? What do your models say going forward?
GW: A century ago, the modal age of death, the most common age of dying, was in the 70s. Now it’s reached the mid-80s. People who are dying before 86 or so are essentially dying prematurely.
MG: When will it be 90?
GW: Quite likely in the next few decades. I think people take it for granted now that retirees should be living into their 80s but not necessarily their 90s. That’s the normal expectation. But that will change, and that’s precisely the source of the longevity catastrophe—because retirees who are retiring in their sixties may not have the finances to keep going into their nineties.
MG: In the United States, at least so far, Social Security has held up and you don’t hear stories about elderly people subsisting on dog food or whatever the horror stories were of previous generations.
GW: Well, it’s all about standard of living. People want to enjoy their days in retirement. Public pensions don’t always provide enough for retirees to enjoy a high-quality life. If I could make a point, recently in America there’s been a change of legislation to encourage the market for deferred annuities, essentially longevity insurance. This kind of product would help an awful lot to remedy the problems we’re talking about. An individual can take out this insurance and the insurer pays up if he reaches an advanced age, say 85 or 90. If he doesn’t make it to that age then the insurance is not needed.
MG: It’s like anti-life insurance.
GW: It’s really catastrophe insurance, essentially. If you count living to 90 as being some kind of catastrophe for your finances, then you need this kind of catastrophe insurance.
MG: As people live longer, do they need less health care? Or when you have more old people is that just going to put more of a strain on our Medicare system?
GW: The aim of medical research is to increase not just lifespan but health span, the years of healthy living. The aim is essentially to compress the ages of illness into as few years as possible. If the modal age of death increases from 85 to 90 that wouldn’t be so great if people were just in bed for five more years. The way it would be advantageous is if people could have five more years of healthy living and the actual time period spent in poor health was kept to whatever it is today, possibly shrunk.
MG: You’ve written about how as important as it is to grow new arms and hearts and livers, that actually being able to talk to somebody might be just as important.
GW: That’s entirely right. If you take two individuals who are in good physical shape when they retire, the person who has greater resilience in terms of cognitive, psychological and social functioning is almost certainly going to be living longer. The classic example of someone who is very highly resilient is Jeanne Calment, who to this day holds the world record for being the longest-lived individual. She was French. She died at the age of 122. Most people once they get past 100 don’t function that well cognitively, but Jeanne Calment at 120 was cracking jokes that would have been great for someone 100 years younger. These resilience factors of cognitive functioning, stress-free life, having a sense of positivity about the future, they’re so important, and then also having a good social network, friends and family and so on. Loneliness is well known to be a killer. It’s really unlikely that someone who’s alone is going to live to be 100.
MG: Could you talk a little about some of the public policy implications of all these things? It seems like we should be thinking about pensions, how to get people to sign living wills, how to get old people into social networks.
GW: I do think the U.S. has been farsighted by encouraging this market in longevity insurance. Not everyone will live to 90 or 100, but people should be able to make provision for this contingency. Otherwise, the burden of helping to look after the very elderly falls on the state. And it’s been said that Social Security is essentially like a Ponzi scheme. The government doesn’t have any money to finance future liabilities; they just rely on money that’s coming in through the door at that time. That’s what happens in a Ponzi scheme. You’re just hoping you have enough new people coming in, so you can use the money you rake in to pay your liabilities. Of course, the problem is that with changing demographics, with the population aging and fewer children being born, you have a situation where soon the money coming in for Social Security may not cover the payments going out. So that’s a headache for future governments, just like climate change. But that might be 20 years out, and politicians are only elected for four or five years, so it’s not really front of mind.
MG: What about private pensions? It used to be you could finish high school, go work for General Motors for 40 years, and then you got your pension. Most jobs don’t have pensions now.
GW: That’s right. And the General Motors pension fund was in huge trouble a few years ago. There’s a whole new generation of people who are no longer getting silver-plated pensions, so the pensions are all based on contributions…. And there’s a whole new era coming where pensioners are not going to be as well off as they are now. If you travel to resort areas, you’ll see a lot of tourists who are benefitting from the generous pensions which they were given in the past few decades, pretty much the lucky pensioners to retire when pensions were fairly generous. They’re pretty much the winners of the pension race.
MG: They have a lot of political power, and they tend to be aggressive about protecting their interests. Generally, their interest is not so much the future.
GW: That’s a very interesting point, because I think in a few decades the gray vote is going to become more important than ever. There will be fewer younger voters, and it seems like the policies which focus on retirees will become more important. And older people are more likely to vote than younger people, so you have a situation where retirees will have a lot of fiscal power.
MG: Huh. You hear a lot that Republican voters—who tend to be older, whiter, more rural, and so forth—there’s this sense that they’re dying off and being replaced by a multi-racial, more cosmopolitan, younger generation. But they’re not dying as quickly as they used to, I guess.
GW: We just had a general election in Britain. Younger people tend to be the most outspoken, but it’s like the silent great majority of older voters kind of put the prime minister back in power…Everyone likes to talk about current problems, short-term problems. But in 40 years, longevity is going to create some real stresses. Even in the Western world, people will struggle to get by on what they’ve saved.
MG: Presumably a lot of this depends on behavior. Like in the U.S., are we going to get our obesity problem under control, are we going to eat better, are we going to get more exercise.
GW: Actually, no, obesity is really a problem for people in younger to middle age. People who weigh 300 pounds when they’re teenagers, they’re not going to make it to retirement. The problem with longevity is a problem of how long a retiree can live. If your constitution is such that you reach the age of 60 even though you’re overweight, then that’s not really a problem for you. So obesity may change the life expectancy for the whole U.S. population, but that’s not the longevity problem we’re talking about.
MG: Most people don’t think of it as a problem. But most people aren’t catastrophists. What happens if somebody in a lab cures cancer tomorrow?
GW: Well, cancer doesn’t make that much difference, either; if an aging person doesn’t die of cancer, they’ll die of heart disease. The real issue is that the aging process can be arrested. The biggest cause of death is not cancer or heart disease. The biggest cause of death is aging. If you can slow down the process of aging, you’re slowing down all causes of death. This is new territory for mankind. There’s an interesting book called “Positively Ninety.” It’s interviews with nonagenarians who are all very lively. My favorite is the cover lady, who actually plays competitive Scrabble at the age of 90. She’s very sharp. Very positive attitude towards life. Very good network of friends and family. If you read these interviews with positive nonagenarians, you’ll get a glimpse into the future, because a high proportion of people will be just like that. The 90s will be like the 80s today. And it will become commonplace to reach 100. In fact, for a baby born today, the expectation is already that they will live to 100.
Michael Grunwald | firstname.lastname@example.org