So You Want to Live to 100? More of Us Will, and Here Is What Life Might Look Like

If your children happened to be born since the year 2000 in developed countries, they will most likely live to be 100, and they will be healthier than elderly people in previous generations, according to a recent article in the medical journal The Lancet.

The implications are enormous for everything from retirement planning and health care costs to new models for the workplace and innovative approaches to education. As Olivia Mitchell, professor of insurance and risk management, states: “This is a demographic revolution the likes of which we have never seen before on earth.”

Add to this observation the fact that economists have trouble predicting what fourth quarter GDP will be, let alone a vision of the world several generations out, and it becomes clear that this latest research will pose unique challenges for governments around the world. “If people knew they would live to be 100, they might want to organize their lives very differently,” says James W. Vaupel, a co-author of The Lancet study and founding director of the Max Planck Institute for Demographic Research in Rostock, Germany. “It means we will need radical changes in public policy.”

A Different Rhythm to Life

According to The Lancet researchers, the gain of about 30 years in life expectancy in Western Europe, the U.S., Canada, Australia and New Zealand — and even more in Japan, Spain and Italy — “stands out as one of the most important accomplishments of the 20th century.” Furthermore, most babies born since 2000 in these countries will “celebrate their 100th birthdays if the present yearly growth in life expectancy continues through the 21st century.” The authors expect that it will: “Continued progress in the longest living populations suggests that we are not close to a limit, and [a] further rise in life expectancy seems likely.”

Given that individuals over the coming decade may routinely expect to work well into their 70s and 80s, what kind of environment can they look forward to? “The good news is that the world of work is changing by itself” in ways that will make it more receptive to older employees, says Peter Cappelli, director of Wharton’s Center for Human Resources. “It’s already easier to work at a distance, easier to telecommute…. The physical demands [of many jobs] are falling, commitments are shorter-term, outsourcing of all kinds is on the rise and there is more contract work — all of which makes it simpler for people to come in and out of the workplace, at least in principle….. The question is, to what extent will employers actually embrace older workers and incorporate more flexibility with respect to schedules, less supervision and more empowerment?”

One potential hang-up centers on the fact that older workers, as they stay on the job longer, are likely to be increasingly supervised by younger managers, says Cappelli. In addition to harboring “a kind of tacit discrimination against older employees, young people also have real concerns as to how they go about managing somebody who has more experience than they do. That’s a challenge not many people intuitively understand how to deal with.” Vaupel concurs, adding that as people work more years of their lives, but for fewer hours per week, the workplace will need to “become friendlier and more accepting of older workers” by, for example, accommodating their desires to work out of, or near, their homes, and by changing potentially hostile attitudes among younger workers toward older employees. Several studies have shown that “in some workplace environments, younger people try to force older people out. That has to change,” he says.

The authors of The Lancet article — titled “Ageing Populations: The Challenges Ahead” and led by Kaare Christensen, a professor at the Danish Ageing Research Centre at the University of Southern Denmark — suggest another potential change in both the employment landscape and people’s lifestyles. “Improvements in health and functioning along with shifting of employment from jobs that need strength to jobs needing knowledge imply that a rising proportion of people in their 60s and 70s are capable of contributing to the economy. Because many [of these] people would prefer part-time work to full-time work, a [growth] in jobs that need 15, 20 or 25 hours of work a week seems likely.”

And if elderly people increasingly choose to work part-time, then more opportunities for part-time work might open up for young people as well. The 20th century, the article states, was “a century of redistribution of income. The 21st century could be a century of redistribution of work” in which employment would be spread “more evenly across populations and over the ages of life. Individuals could combine work, education, leisure and child rearing in varying amounts at different ages.”

Gabriele Doblhammer-Reiter, executive director of the Rostock Center for the Study of Demographic Change in Rostock, Germany, and a co-author of the article along with Christensen, Vaupel and colleague Ronald Rau, sees this potential redistribution of work as a positive outcome. “If older people work part-time, could young people work part-time as well?” she asks. “If that is possible, it would be wonderful because at the moment, the majority of working hours [occur] at times when we have so many other responsibilities, such as raising a family.” Wharton management professor Nancy Rothbard sees organizations allowing employees to reprioritize different aspects of their jobs at different times — perhaps concentrating on tasks or specialties that no longer require the same expertise that was needed earlier on — or perhaps going back to school and retooling. It is especially important to keep up with the technology skills demanded in one’s job or profession. Older workers, she says, “have a wealth of experience and breadth of knowledge that is impressive and can be extraordinarily valuable. That has to be balanced with the need to remain current.”

Predictions about the future of the workplace depend on the individual country. “The U.S. differs from Japan and Europe in that the U.S. still has a fairly young labor force, in part because of high birth rates and a large number of immigrants,” says Vaupel. “But in Europe and Japan, there will be a real shortage of workers in the coming decades. This means that companies will be trying to keep older people in the workforce and encourage retirees to come back. Managers are already beginning to think about how to ensure some reeducation among older workers” — just as younger people frequently receive on-the-job training to help them sharpen existing skills and acquire new ones.

Mitchell goes a step further. “The real challenge of living to be 100 will be to systematically weave financial literacy into elementary, middle and high school programs,” she says. “We need to get people to think differently about investing in themselves, in their human capital. Individuals will need to assemble a tool kit that will get them not only a first job or prepare them for a 20-year career, but help them fashion several different 20-year careers over a lifetime.” This will require a very different approach to education, she adds, one that will “get people back to school periodically and teach them to keep learning, instead of just having knowledge frozen” at one point in their lives.  

Indeed, her biggest concern about the new mortality projections is “the very difficult time that the average worker has understanding basic economics, much less longevity risk. Life expectancy now is close to 80, yet less than 20% of the American population in their 50s has even tried to design a retirement plan. If you add another 20 years on top of that, then people need to become much more [knowledgeable] about saving and investing for retirement.”

Raising, or Eliminating, the Retirement Age

If people live to be 100, how will that affect the retirement and health insurance systems set up to help individuals through the last decades of their lives?

As it is now, different countries have different retirement policies. In the U.S., there is no mandatory retirement — with the exception of certain job categories such as commercial airline pilots, some judges and some top-level management — and, in fact, in most jobs it is illegal to force people to retire. But numerous signposts act as “de facto” retirement inducers, says Mitchell. For instance, under the U.S. Social Security system, the “normal” retirement age is defined as 65 (eventually moving up to 67). The official use of the term “normal” was intended to mean the age at which someone could begin collecting unreduced benefits, but over time it became a reference age automatically associated with leaving work. Another example of this is that the system currently allows one to claim benefits as young as age 62 (though payments are reduced). “My concern is that by codifying age 62 as the age at which one can begin receiving Social Security, this age becomes a target. In fact, the typical American claims benefits at age 62, even though many would benefit substantially by delaying claiming.”

In the next few years, Mitchell argues that “retirement ages will have to rise quite substantially, to 70 or beyond, to finance the baby boom generation as it moves up through the age structure.” When Social Security was put in place in the 1930s, she says, “life expectancy was a lot shorter. In fact, we adopted our concept of the ‘normal’ retirement age from the German system which set the age of retirement at 65 because half the people never lived that long. That was a true social insurance scheme; it only covered those who outlived their life expectancy.” Over time, Mitchell notes, “the U.S. transitioned from thinking about Social Security as a longevity insurance scheme, to using it as a transfer program that pays people not to work for 30 to 40 years. As life expectancies rise, and fewer young people are available to pay taxes, it gets more and more expensive to sustain the scheme. If we are to finance longer life spans, we will have to train smarter, work longer, save more for our own retirement, and restructure Social Security as the longevity insurance program it was intended to be.” Retirement, Mitchell adds, “isn’t going to be as appealing for future generations, as it has been for our parents.”

According to Kent Smetters, Wharton professor of insurance and risk management, the Social Security and Medicare trustees have already incorporated increases in longevity in planning for payments to senior citizens. “The big debate is over whether they are incorporating enough of an increase.” Longevity is an important variable, he says, because under current law, “the retirement age is not automatically indexed to increases in longevity,” meaning that a larger and larger fraction of the population is going to be in retirement if they continue to live longer without facing an increase in the retirement age. “Eventually, the normal retirement age will have to become more proportional with the growing length of life, maybe 70 or even 75 over time within a few decades. That age might seem ridiculous to people now, but it probably won’t in 20 or 30 years. People could still choose to retire at 62, but their benefits would be greatly reduced, based on a normal retirement age of 70 or 75.”

He views the increase in people’s life expectancy as “a positive development provided that we as a nation can deal with the increasing strain on entitlement programs. However, there will be some debate. The 2001 Social Security Commission encountered public opposition from labor leaders and some employers to increasing the normal retirement age. Still, when not on public record, almost everyone who testified agreed that it would eventually be necessary. The math simply requires it.”

As for Medicare, “the longer people live, the more taxed the Medicare system will be,” says Smetters, adding, however, that Medicare is more non-linear than Social Security, which is a cash benefit that keeps on paying. With Medicare, a majority of a recipient’s health care costs are concentrated in the last two or three years of life. So “pushing out that particular portion of spending into the future will save money in present value.” But another portion of money is also spent before the last few years of life: Increasing those years, therefore, increases spending. “The net effect will be to increase the Medicare costs, which is a big problem because Medicare shortfalls are already so huge and the program is already so underfunded. The crisis for Medicare will come much sooner than the crisis facing Social Security.”

Wharton health care management professor Mark V. Pauly concurs with the view that the extra years being added on to life expectancy are generally high quality ones, “so much so that a person’s present discounted value in Medicare spending doesn’t really go up that much when we add increased life expectancy because most of the buildup in [health care costs] occurs in the last few years of life. Everybody has those last few years; they will just have them later.” This is not a guaranteed scenario, he adds, because health maintenance expenses incurred by people as they age might cause additional strains on the system that are hard to anticipate now.

Indeed, he says, “Medicare is in such terrible shape that any problems posed by increased longevity are minor.” And it’s not getting better, he adds, pointing to health care reform proposals from Congress and the Obama administration which he says are taking away money that should be used for Medicare. “There are ways to mitigate the Medicare disaster, but they have been hijacked by health care reform,” he notes, citing one specific proposal to take money out of private Medicare plans to pay for health insurance for people under 65. “We all have ideas of how to save Medicare, but our arsenal of relatively modest tools has been used to pay for health care reform.”

The retirement picture is different in Europe, “where we have very strict retirement ages,” says Doblhammer-Reiter. “It is 65, and in many countries, it will increase over the coming years to 67. But actually people now retire at the beginning of their 60s. Nobody works until 65,” she notes, in part because older workers are more expensive and less flexible, which means that in times of high unemployment, they are laid off more often than other age groups. In Europe, she adds, “the countries with the highest life expectancies have the lowest retirement ages. Italy is an example. This is not sustainable; the pension system can’t be funded if it isn’t changed. There is no way out of either cutting the pension allowance or having people retire later.”

What age should retirement be set at as we encounter generations living into their 100s? “It depends on the occupation,” Doblhammer-Reiter says, “which means we probably need flexible retirement ages. I am a professor. In Italy, professors work until age 75. In Germany, there is a mandatory retirement age of 65, although for my cohorts it will be 67…. Yet I’m sure I could work until 70 or 75.” A number of European countries are currently considering ending mandatory retirement based on age, Vaupel points out. “Denmark last year already [did]…. And there is a move towards making pensions actually fair: If you work more years of your life, you get a bigger pension. People will have a choice about when to retire. My guess is that many will elect to work longer.”

More People Chasing Fewer Jobs?

Although The Lancet study didn’t look at the developing world — in part because of the difficulty in getting consistent information on health and ageing issues — these countries are also experiencing increases in life expectancy. In addition, China and India both have relatively young populations, suggesting that they will be available to buy the retirement assets of older investors in developed countries over the coming decades.

Meanwhile, if people are living longer and in better health, and if they are choosing to work later in life, will there be enough jobs to keep them employed? “Nobody knows,” says Mitchell. “What we can do is look at the handful of countries that have aged more quickly than the U.S., like Japan and Singapore. We know there is substantial pressure on employers to set up more flexible work arrangements so that people can job share. In Japan, they have mandatory retirement — often at age 60 or 65 — but an employee might work up until a Friday, retire, then show up again on Monday at the same company in a new job earning half the pay. So the whole compensation and job responsibility issues are renegotiated, and the employee’s role in the company is quite different. He may be a mentor or a consultant, which provides both the wisdom and continuity of knowledge that older workers typically have to offer. But it also allows the next generation to come in and learn the ropes.”

According to Wharton finance professor Andy Abel, three basic data points determine the number of working age people: first, births 20 years ago, which indicate how many 20-year-olds there are in the workforce; second, immigration, both legal and illegal, among all age groups; and third, mortality rates.”

Given that The Lancet study suggests a significant reduction in old-age mortality, will more people be working longer and chasing after fewer jobs? “Not necessarily,” says Abel. “Where macroeconomics comes in is that there are more people around and they are demanding more health care, more recreational facilities, and other types of goods and services. So one shouldn’t think of there being a fixed number of jobs. Overall demand for goods will go up, and that will help create an increasing demand for jobs. The impact on compensation will depend on what goes up more: the supply of labor or the demand for labor.”

Smetters sees two effects in terms of job growth. “As people live longer and if they can maintain their productivity, they will simply increase their working years. If someday we are living to be 150, we obviously won’t be retiring at 65. Second, it is true that if you have a lot of people competing for the same jobs, the jobs will be created simply because there is a potentially cheap and experienced workforce.” If there is indeed this bulge of people, it could also mean that the wages being paid will be lower. “But not everyone will be doing it for the money,” he notes, adding that elderly people also rejoin the workforce in order to socialize and keep active.  

Meanwhile, in Europe, unlike in the U.S., there will be a decline in the labor force, “which means there will be jobs available,” says Doblhammer-Reiter. “Resources will have to be found. Elderly people are one possible resource; another one is women. In many European countries, women don’t work when they have families. A third resource is immigrants. But given the political discussion in European countries, I think it is less controversial” for elderly workers and women to enter the work force rather than to open the door to higher immigration. Vaupel also notes the differences between the U.S and other regions. The birthrate in the U.S. has been much higher in the preceding decades than it has in Japan and Europe, he says, and the country has experienced a much greater influx of immigrants, along with “not very much outmigration.” In addition, people who move to the U.S. tend to be of working age, which increases the labor pool, and they are often highly educated.

A More Holistic Approach to Health

The Lancet researchers also reviewed a number of studies focused on health trends among older populations — some negative, some positive, says Vaupel, although “on balance, things are probably getting better.” On the positive side, for example, “rapid progress is being made in reducing heart attacks and other cardiovascular illness, some progress is being made against cancer, although it’s slow, and there are some indications we are beginning to understand Alzheimer’s disease better,” he says. Doblhammer-Reiter also cites advances in medical technology and life style changes — being more active and cutting down on smoking — as positive directions.

What is not improving is the outlook for obesity and diabetes. “They seem to be deteriorating rather than improving over time,” says Doblhammer-Reiter. Indeed, note the researchers in the article, “obesity is a widely discussed risk factor that threatens improvements in health [and] has been increasing in almost all populations…. Obesity is related to various poor health outcomes, including raised risk of diabetes, arthritis and stroke.” Meanwhile, the number of diabetes cases is expected to more than double worldwide due to the ageing population, with the largest increase occurring among people 65 and older. 

The study also looks at existing data on disability, mobility, hearing problems and other age-related conditions, but points out that “little is known about trends in cognitive function and dementia” — an area that Vaupel, among others, feels would benefit from significantly more research. “There is good evidence that we are living longer and healthier in terms of physical function, but the evidence is more mixed on cognitive function,” he says. Further studies are needed to find out “what people can do to keep their cognitive functions going as they get older.” He also calls for an increase in geriatric medicine. “Today’s system is organized around specialists — cancer, heart, brain, etc. — but older people, even relatively healthy ones, generally have several different problems. As a public policy issue, there needs to be better coordination to make sure that individual doctors are not prescribing medicines that interfere with each other. We need to start treating people holistically.”

According to Mitchell, “Economists like to say that health is another component of our human capital — the source of our strength and versatility in dealing with the future.” It’s not about “just being fit as a child or a young adult, but about making an investment in good health throughout your whole life so that you will be a fitter 100-year-old as well.” Mitchell and others recently completed “The Health and Retirement Study” that looked, in part, at attitudes of people age 50 and older now, compared to those 50 and older 12 years ago. “We saw a big change between the two groups, in that today’s baby boomers expect to have more complex careers in the second half of their lives. Many of them think they will continue to work in some capacity, perhaps not in the same job, but consulting, possibly starting their own business — this was before the financial crisis — and doing more volunteer projects. We can expect this trend to continue as people retire later and later in their lives.”

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