Posts Tagged ‘ageing’

average and median life expectancy

Wednesday, December 21st, 2016

An important unpaid resource of the Financial Times is its stable of intelligent, observant readers. Here is an example. Last week the paper published an op-ed written by British-Indian science journalist Anjana Ahuja.

Today, the FT published the letter of a reader who caught an error in Ms Ahuja’s column.

[Anjana Ahuja] states that “most American babies born in 1900 failed to live past 50”: it is true that life expectancy in the US in 1900 was approximately 47 years. However, it needs to be recalled that a life expectancy calculation is an average or mean; to be precise, a weighted average expected number of years of future life as of a given point in time, in this case, birth. However a claim about the age below which the majority of a given birth cohort will die, is a statement about the median age at death rather than the mean age at death.

Life expectancy calculations at birth, especially those calculated before the mid-20th century, can deviate significantly from the corresponding median ages at death due to the effect of infant and childhood mortality rates. As it turns out the calculated median age at death for the US 1900 birth cohort was more like 56 or 57.

Peretz Perl, “How life expectancy calculations deviate“, letter to the editor, Financial Times, 21 December 2016 (metered paywall).

This is an important point. The mean simple average) and the median measure different things. To illustrate with an exaggerated, hypothetical case, suppose we have a sample of 100 individuals born in the same year, 40 of which die at age 5, 50 at age 50 and 10 at age 70. The average (mean) life expectancy at birth for this cohort would by 34 years. But the median life expectancy would be 50 years. Why? Because this is the life expectancy of the median person, i.e. the life expectancy of the 50th person (the median!), arranging all individuals in order of their years of life.

I may be wrong, but my impression is that few in a population of supposedly well-educated people are able to distinguish between a mean (simple average) and a median. If Ms Ahuja, who has a PhD in space physics, confuses the two measures, anyone can.

The median is useful concept. I think it should be taught in middle school, or even earlier.

Alas, life expectancy changes over time, typically increasing, so calculation of the median for a specific cohort becomes more difficult. Mr Perl goes on to explain that, for this reason, the  “’calculated’ median understates the actual historical median age at death for that cohort”:

That’s because the standard calculation for such a median age at death assumes that the probabilities of death at each age are frozen at the rates that were applicable in the year of calculation — in this case 1900. The true median age at death for the 1900 US birth cohort was dramatically impacted by the ongoing improvements in longevity as the cohort made its way through the 20th century.

For example, the probability that an American born in 1900 who had survived to the age of 40 would die before age 41 was significantly lower when he or she actually reached age 40 in 1940 than what it was thought to be in when they were born in 1900, and so on. The actual median age at death to which most Americans born in 1900 survived was closer to 60.

Mr Perl displays an impressive knowledge of demography and statistics, far beyond what might be expected even from a Financial Times reader! I googled “Peretz Perl” and discovered he is an actuary at New York-based TIAA-CREF, one of the largest pension funds in the world. That explains everything.

We cannot all become actuaries. But it should be possible for all of us to distinguish between a mean and a median. The concepts are not difficult and, in my opinion, could be taught to students from an early age.

under-consumption in retirement

Friday, September 9th, 2016

FT columnist Merryn Somerset Webb worries that “too many people ruin their retirement by deferring their consumption for too long”.

At a meeting of fund managers and wealth managers a few weeks ago, I said that I thought the priority of wealth managers looking after pension savings — the ones who really care about their clients, anyway — should be to make sure that most of their clients die close to broke. It didn’t go down that well. There were sharp intakes of breath all around. ….

That’s because most [fund] managers — and their clients — see capital and income as two entirely different things. Capital is not for spending — even in retirement. Income (in the form of dividends, and so on) is the thing for spending. ….

This is silly. ….

[D]ying broke is easy; stretching your money out so it is used evenly over your retirement and then dying broke is really hard. Who can get that timing right? This problem used to be solved by annuities — which before pension freedom pretty much everyone had to buy. These made no distinction between capital and income: the whole lot was handed to an insurance company in exchange for an income for life. If that was all you had, you automatically died broke. ….

I’ve said this here before but it bears repeating. The financial services industry has not yet got to grips with helping people figure out how to de-cumulate. It is time it did — think annuity-style products, funds that distribute percentages of total returns, or a new kind of return-smoothing product, perhaps.

I’ll leave that with them — and even chuck in a little incentive. The first company to come up with a product that helps retirement savers run down their capital effectively and that comes with the strapline “Let US help YOU to die broke” will get an honourable mention in this column.

Merryn Somerset Webb, “Why we should all aim to die broke“, Financial Times, 9 September 2016 (metered paywall).

I agree, with one reservation. Often, retirees have dependents who rely on them for financial assistance. If such a retiree dies penniless, dependents might be left destitute. If the only dependent is a spouse, the solution is simple: a joint annuity. This is a pension that continues until BOTH beneficiaries die, though with a smaller amount (typically 50%) for the widow or widower of the primary pensioner.

The same logic applies to other dependents. There is no reason more beneficiaries cannot be added to an annuity, with any desired sum awarded monthly for life upon death of the primary holder of the annuity.

All this comes with a cost. The pension will be smaller the larger the number of beneficiaries, the longer their expected lifetimes, and the younger the expected age that the annuity begins.

Other types of annuities are possible. If a dependent is a child, the pension could cease when the beneficiary reaches a specified age (say, 18 or 21 years).

These annuities are useful, but complex. The financial services industry could make itself useful by devising affordable products to meet the varied needs of retirees AND their dependents.

the case against mandatory contributions to pension schemes

Tuesday, August 23rd, 2016

Two years ago I prepared, for the record, an annotated version of my June 2000 paper “Three Pillars of Pensions? A Proposal to End Mandatory Contributions”.  This paper in 2000 marked an important moment in my life, the beginning of an obsession with reform of old age pensions.

The annotated version of the paper has been accessible only at larrywillmore.net. To make this version widely available, in a permanent fashion, I uploaded it today to the Munich Personal RePEc Archive (MPRA). It can now also be accessed at the following link (free registration required):
https://mpra.ub.uni-muenchen.de/73288/1/MPRA_paper_73288.pdf

This short paper defined my future work on pension reform. In April of the year 2000, I was at an OECD conference in Prague, listening to presentations of two World Bank economists (Estelle James and Dimitri Vittas). At that moment, it suddenly dawned on me that an ideal pension system should provide basic pensions for everyone, funded pay-as-you-go from general government revenue, allowing citizens who desire more than basic income in retirement to save in any way they please, without subsidies, tax breaks or coercion from government. This was my ‘Eureka’ moment.

When it was my turn to speak, the very next day, I spoke with excitement and enthusiasm. The conference was on private pensions, so the audience did not react warmly to my talk. Nonetheless, I presented my core ideas orally, and drafted a discussion paper immediately after the conference.

The OECD published a version of my paper “edited for length” in 2001 on pp. 385-397 of its “Private Pensions Conference 2000” proceedings. The editors changed the subtitle from “A proposal to end mandatory contributions” to a blander “Is there a need for mandatory contributions?” In my opinion, the OECD editors removed essential points from the paper. For the record, I have highlighted all their deletions in yellow, so readers can judge for themselves how much of importance was omitted.

Have a look at the deletions the OECD editors made. Decide for yourself whether these were fair, helpful or necessary.

ageing and the sustainability of retirement pensions

Saturday, December 26th, 2015

Via Mark Thoma, here is an excellent explanation, by Dean Baker, of why pay-as-you-go pensions financed by payroll taxes are seldom a problem when wages are rising. (more…)

coping with an ageing prison population

Tuesday, October 27th, 2015

Growing numbers of incarcerated older men are straining Britain’s cash-strapped penal system.

FT journalist Helen Warrell reports from Rye Hill sex offenders’ prison, where nearly one in five inmates are aged 60 or older.

The Jimmy Savile sexual assault revelations sparked a wave of historic abuse claims [in the UK], leading to a surge in reported historic sex crimes. ….

[P]rosecutions for these past offences — and the resulting influx of older people into UK jails — are placing new strains on a prison service already struggling to find cuts of at least 25 per cent under the government’s austerity programme. In 2015, the number of over-60s in jail topped 4,000 for the first time on record, more than double the figure 10 years ago. It is the fastest-growing age group in custody.

The Prisons and Probation Ombudsman recently investigated the case of a 94-year-old prisoner who had been removed from a care home to serve his sentence and died after falling out of bed in his cell. To avoid such incidents in future, governors more used to restraining violent young men than nursing the elderly are touring hospices, hospitals and care homes to gather expertise on treatment of the ill and the dying.

Alongside these practical considerations come wider ethical dilemmas for society: whether it is right to enforce punitive regimes on the terminally ill; how to rehabilitate those who will never be released; and whether there is any point in incarcerating those who are so old or so demented that they do not even know they are in prison.

Helen Warrell, “UK prisons: old crimes, older inmates“, Financial Times, 26 October 2015 (metered paywall).

There is much more in this long and interesting “Big Read” article. Is the prison population also ageing in Canada and other countries? I don’t know, but would like to learn, so will appreciate any information TdJ readers are able to provide.

promoting universal pensions in Vietnam

Friday, October 2nd, 2015

In 2014, here in Vietnam only 2 million older people received [employment-related] pensions, and around 2.9 million older people received allowances from social assistance programs [i.e. social pensions]. This left some 4.6 million people aged 60 and above uncovered by any social protection scheme ….

Social, public and private pensions must be expanded to increase coverage to the vital informal sector. ….

Not only would a sustainable pension system provide the means for millions of older people to attain a better quality of life, but it would also help ensure their dignity. …. Providing a social pension of US$15 per month for all people aged 65 and above would cost only 0.3% to 0.5% of GDP, which is a very small fraction of Government spending but could have a huge impact on the lives of older people.

Vietnam has worked very hard to increase life expectancy. But this achievement is surely wasted if Vietnamese citizens cannot live these additional years in comfort and in dignity. …. By taking action now we can ensure that retirement is the best, and not the worst years of our lives.

Ritsu Nacken,”The worst of times, or the best?“, Than Nien News, 1 October 2015.

Ms Ritsu Nacken is Acting Representative of the United Nations Population Fund (UNFPA) in Vietnam.

According to HelpAge International, the government of Vietnam provides social pensions of 180000 Dong (US$8) to 14% of the population aged 60 and older. Six of every seven of these social pensions are given to  residents aged 80 years and older who receive no other pension income. One in seven social pensions go to residents aged 60 to 79 years who live in poverty and are willing and able to pass a means test. Total government expenditure on social pensions amounts to a tiny sum: only 0.01% of gross domestic product (GDP).

I do not understand why Ritsu Nacken provides such a wide range of estimates (0.3% to 0.5% of GDP) for a universal pension from age 65. I suspect that the 0.5% estimate might be for the cost a universal pension from age 60, but have not checked the numbers. The high figure could also refer to the projected cost of pensions from age 65 at some point in the future.

population ageing and economic growth

Friday, August 28th, 2015

Pundits frequently warn us to avoid population ageing, because of its negative effect on economic growth. FT reader Simon Ross, in contrast, sees population ageing as an opportunity to be seized.

An ageing population should encourage us to use the skills and experience that workers have developed during their careers into their later lives. A falling workforce can prompt us to improve both workforce participation among the marginalised, and levels of automation and efficiency.

…. Populations cannot grow forever. A falling population is an opportunity to reduce the cost of living as competition for housing and other resources falls, to reduce emissions and resource depletion, to move to sustainable energy production and to improve biodiversity from today’s low levels. For the individual, what matters is not the overall size of the economy but average per capita income, and how that income is distributed. [Emphasis added.]

Simon Ross, “Use the experience older workers have developed“, letter to the editor, Financial Times, 27 August 2015 (metered paywall).

Mr Ross is CEO of Population Matters, a UK-based advocacy group.

ageing and prejudice

Friday, July 24th, 2015

I have long been aware that older persons, like children, tend to be less inhibited in expressing opinions, even though their opinions, and choice of language, might offend. But, do people actually become more prejudiced as they age? University of Queensland psychologist William von Hippel (born 1963) thinks that this is not unusual.

My research suggests that, although many people remain unprejudiced throughout their lives, older adults have a tendency to be more prejudiced than their younger counterparts.

Psychologists used to believe that greater prejudice among older adults was due to the fact that older people grew up in less egalitarian times. In contrast to this view, we have gathered evidence that normal changes to the brain in late adulthood can lead to greater prejudice among older adults.

The frontal lobes are the last part of the brain to develop as we progress through childhood and adolescence, and the first part of the brain to atrophy as we age. Atrophy of the frontal lobes does not diminish intelligence, but it degrades brain areas responsible for inhibiting irrelevant or inappropriate thoughts. Research suggests that this is why older adults have greater difficulty finding the word they’re looking for – and why there is a greater likelihood of them voicing ideas they would have previously suppressed.

…. When I was teaching at Williams College in Massachusetts, an African-American student told me how her white grandfather had recently started referring to her as his “little nigger grandchild”. She was shocked and hurt by this, and couldn’t understand why her grandfather would say such a thing when she knew he loved her and was still mentally alert. The consequences of his disinhibited words were substantial ….. ….

[P]eople who find themselves becoming less tolerant or more prejudiced can be quite unsettled by the shift in their own attitudes – a change that can affect friendships and their position in society.

William von Hippel , “Do people become more prejudiced as they grow older?, BBC News Magazine, 17 July 2015.

Sadly, Professor von Hippel has no remedy for those of us who become less tolerant and more prejudiced as we grow older. It is something to keep in mind, however.

Florida in Japan?

Friday, June 26th, 2015

Japan’s population is ageing rapidly, and so is the cost of caring for those unable to live independently. This cost is especially high in Tokyo. An influential think-tank has come up with a solution for the problem: move large numbers of Japanese pensioners to smaller cities, where costs of care are lower.

Many people dream of retiring to the countryside but the city of Tokyo has been told to help pensioners on their way by shipping 1m of them to the provinces to avoid a looming “care crisis”.

The controversial proposal from the Japan Policy Council … has prompted a fierce backlash from regions that already resent Tokyo for stealing their young, even without sending them its elderly in exchange. ….

[T]he number of care facilities in Tokyo is half the national average and building more would be difficult and costly ….

The JPC [report] identifies 41 regional cities with ample care facilities, from Asahikawa on the wintry northern island of Hokkaido to the subtropical paradise of Miyako island in the southern seas. ….

Faced with paying to look after Tokyo’s pensioners, Japan’s regional politicians have given the plan a frosty reception. ….

[Tai Takahashi, one of the authors of the report,] says there needs to be a way for Tokyo municipalities — which would save heavily by not having to build care facilities — to compensate cities that take its pensioners.

That would make it an opportunity for regional cities, first to enjoy the spending power of rich retirees, and then to create work taking care of them. “We need a Japanese equivalent of Florida,” says Mr Takahashi.

Robin Harding, “Tokyo told to send 1m elderly to provinces as ‘care crisis’ looms“, Financial Times, 25 June 2015.

The article is informative, but it is not clear to me what “care facilities in Tokyo” equal to “half the national average” means. Is this number of nursing home spots per capita? per pensioner? per pensioner older than age 75? I have submitted my query to the FT as a comment, and will report any response that I receive.

history with age

Sunday, June 7th, 2015

I’m getting old. Not older, just old. ….

I’ve discovered history isn’t static and rarely leaves us. Many of my school history lessons were, in retrospect, bizarrely misleading and limited as school history lessons sometimes are. Travelling abroad and eventually just reading rather more varied history books allowed me to discover that, for example, history happened to foreigners and women, too. The past isn’t only white, only British, only flattering to Britain, or even concerned with Britain.

AL Kennedy, “A Point of View: How time passes differently as you get older“, BBC News Magazine, 5 June 2015.

Alison Louise “A. L.” Kennedy (born 1965) is a Scottish writer and stand-up comedian. She describes herself as old? To me, age 49 is quite young. No doubt, though, Ms Kennedy is mature beyond her years. Her latest publication is All the Rage (Houghton Mifflin Harcourt, 2014), a collection of short stories.