Living that long would break the economy. I’m retired on a fixed income, and my planning was based on living no longer than age 90. After that, my savings will be depleted, I will live on social security alone. When I imagine young people having another 30 years to pay for social security per person, it’s just broken. We would need to work until age 95 instead of 65. What would be the point?
The extra amount you need as life expectancy increases diminishes with each extra year. E.g. let’s assume (for each of calculation only; you can just scale it up linearly) that you need 10k/year on top of social security to live off in retirement. If your savings is 100k, and you only get a 5% return every year, you’ll run out after about 15 years. Hence a typical lifetime annuity bought at age 65 will be around that in the US because it matches up with current US life expectancy (it won’t deviate much elsewhere).
So that’s for living to roughly 80. Here’s how it’ll play out as you approach 120:
85: ~20% more
90: ~38% more
95: ~52% more
100: ~62% more
105: ~70% more
110: ~77% more
115: ~82% more
120: ~86% more
As you can see, the curve flattens out. It flattens out because you’re getting closer and closer to have sufficient money that the returns can sustain you perpetually (at a 5% return, which is pretty conservative, at $200k, you can perpetually take out $10k, and no further increase in life expectancy will change that).
Now, that of course is not in any way an insignificant increase, but if we assume 40 working years, $100k is about $850/year additional investment + compounding investment return at 5%. $186k is around $1550/year compounding.
But here’s the thing, if you work 10 years longer, you grow it disproportionately much, because you delay starting to take money out, and you need less, while you get the compounding investment return of ten more years, and that drives down the yearly savings you need to make back down to around $850/year.
So an increase of 40 years of life expectancy “just” requires 10 more years of work to fully fund it assuming the same payment in during the later years. But here’s the thing: Most people have far higher salaries towards the end of their careers, even inflation-adjusted, so most people would be able to fund 40 more years with far less than 10 extra years of work.
(Note that if you already were on track for your pensions to last you to 90, if you were pre-retirement now, you’d “only” need about 35% extra savings to have enough until 120, because you’d get returns from a higher base, so the extra savings or extra years of work needed over what you managed would be even lower)
These all work on averages btw. - due to differences in health, this is where we really want insurance/state pensions rather than relying on individual contributions.
This doesn’t mean there aren’t problems to deal with. Especially if the life expectancy grows fast enough that it “outpaces” peoples ability to adjust. But it’s thankfully not quite as bad as having to add another 30 years of work.
Most of our financial advice for retirement has a hidden assumption that there is a large number of working age people helping not just social security, but also the stock market. A standard retirement portfolio will have a mix of t-bonds, stock market holdings, and a few other sectors.
We’d be looking at a scenario where there are a lot of small investors (a few million dollars is small on this scale), but proportionately fewer workers making use of that investment.
A US Millennial working today is going to need to be a 401k millionaire to retire with something comparable to their current standard of living. Most are going to fall short of that before we even talk about adding on extra life span.
The numbers I gave are entirely independent of social security. They presume a far below average stock market return. You’re right they’ll need to be a 401k millionaire, and per the numbers I gave, to achieve that will take around ~9k/year in pension investments if they intend to retire at 65. A lot obviously can not afford that, especially not early in their career, and will need to compensate accordingly later in their career to the extent they want.
But that wasn’t really my point. My point is that the number of extra years - irrespective of your current pension situation - you need to work in order to maintain the same financial outlook is far lower than the number of additional years of retirement you can cover. Whether or not you’re able to get to a sufficient pension level in the first place is a separate issue.
To how the stock market will fare, the big challenge there is whether or not automation will keep up or not, and frankly I think the biggest social upheaval over the next century will not be that it can’t keep up, but that automation will outpace the proportional decline in the potential labour pool.
You might want to look at the Trinity Study of retirement portfolios. The general rate of withdrawal is lower than what you’re quoting here. Closer to 4% or lower. Though this is giving way in some quarters to a sliding system, where you live it large in good return years, and frugaly in bad years.
But again, this all overlooks how that depends on a proportion of working people feeding stock market returns.
The general rate of withdrawal need to be lower if you have a portfolio that is very conservative. That may make sense when you’re saving for you yourself and have a low risk tolerance, but it’s not needed. That people feel worried enough to do that, though, is a good argument for insurance/state run pension schemes, because they an inherently pay out more since they can smooth out the risks and pay toward the maximum averaged returns.
I think things are gonna get really ugly in the next twenty years.
We’re nearing a point where artificial intelligence can replace a lot of white collar and logistical jobs, which would skyrocket unemployment rates and lead to widespread riots.
Don’t get me started on what a leftist pipe dream universal basic income is. The guaranteed income UBI would give would either bankrupt our economy or be such a pittance that nobody could live off of it
I did number crunching on how much it would cost to pay every UK adult a guaranteed basic income that could theoretically pay for rent in most cities outside of London, assuming £800 pcm and 50,000,000 adults. That would cost £480,000,000,000 a year, or almost 2.5 times our entire welfare budget, of which about £100b alone goes into pensions.
And before you suggest automation and wealth taxes would pay for UBI… good luck with that. We can’t even get the rich to pay their fair share of taxes right at this moment.
Given how much politicians serve the rich, I think they’d sooner sic the military on protesters than actually cave in to the demands of the masses, especially when armed drones could do a lot of the gruntwork. The wealthy don’t care if you’re destitute, starving and living on the streets.
It’s a more radical version of welfare capitalism. Socialism is about worker control of the means of production. This would mean all the factories and agricultural land and cloud servers, etc would be owned by the people who work there. UBI is simply keeping the poor alive through subsidies. We do it already through all sorts of things. For example food prices are heavily subsidized. It’s just taking that idea and taking it to the logical extreme.
It’s not leftist at all. Leftists may support it because it will improve the living conditions for the bottom class. But fundamentally it does nothing to put the means of production into the hands of the workers. A leftist idea would be for example forcing all private companies to become cooperatives.
I agree with you that things are going to get ugly very soon. Our society simply isn’t equipped to handle this dramatic transformation that is coming. I think we will likely see some sort of serious war going forward as well. I’m just glad I live far enough away from the likely nuclear bomb targets where I probably wouldn’t die immediately, lol.
I think UBI is really the only solution that will be able to maintain our current capitalist system and way of life. Anything else would essentially lead to revolt. Idle hands are the devil’s plaything. If 50% of the young people in the country aren’t working, you’re either going to see a massive prison complex or a militant revolt. Probably both.
UBI however would further our jump into dystopia. Imagine a society where the bottom 80% survive off of the government’s hand. They live in ghettos, segregated from the people who own capital. Majority of the country live in abject poverty getting only basic necessities. Starting to sound a lot like 1984…
But it is. It may not be Communist or Socialist but it’s a radical idea to redistribute wealth to the masses and effectively create a literal welfare state. Pretty much every party that supports UBI is left wing.
If 50% of the young people in the country aren’t working, you’re either going to see a massive prison complex or a militant revolt. Probably both.
I think we’ll see a full societal collapse in the next few decades, whether that’s a descent into lawless anarchy or civil wars.
My great grandma died at 101 earlier this year. She had ran out of money a while ago, but she had so many descendants at that point that everyone took turns caring for her. One of her daughters lived with her and the other 6~7 children all pitched in.
She never had to stay at a home. That’s a nice thing about being old as shit, assuming you had at least some children. Your descendants exponentially increase allowing you to draw money from a significant pool of people.
I flew into the country to visit her for her 100th birthday and there were almost 100 people there, majority family members.
Maybe this is an unpopular opinion, but I don’t think working till very late age is a bad thing. I don’t expect to be sitting on my ass whole day long by the time I get to retirement age. What I do think is a bad thing is if by that time I am financially struggling to get by.
The problem is we’re not fixing the economy at the other end. People work later because they’re healthier, and that could be good… but that means more people to do the same amount of work, increasing unemployment.
Until we stop demonising non-work and that’s going to be hell for those stuck on it. Get some level of basic income so it’s a valid choice. Meanwhile in the UK our govermnent is appealing to the boomers by announcing increased punishment of the unemployed… We’re a long way from fixing the issues.
Living that long would break the economy. I’m retired on a fixed income, and my planning was based on living no longer than age 90. After that, my savings will be depleted, I will live on social security alone. When I imagine young people having another 30 years to pay for social security per person, it’s just broken. We would need to work until age 95 instead of 65. What would be the point?
Think we should moved towards post-scarcity first…
Man, if only we had some sort of military funding to divert to social programs…
We spend as much as the top 10 countries combined on defense.
Infrastructure - dangerously old Healthcare - non-existent Education- death spiral Social health - All measures worse every year
Don’t know, we tried nothing and are out of ideas thanks to the vice grip of lobbies and bribes Eisehower himself warned about.
We would not.
The extra amount you need as life expectancy increases diminishes with each extra year. E.g. let’s assume (for each of calculation only; you can just scale it up linearly) that you need 10k/year on top of social security to live off in retirement. If your savings is 100k, and you only get a 5% return every year, you’ll run out after about 15 years. Hence a typical lifetime annuity bought at age 65 will be around that in the US because it matches up with current US life expectancy (it won’t deviate much elsewhere).
So that’s for living to roughly 80. Here’s how it’ll play out as you approach 120:
85: ~20% more 90: ~38% more 95: ~52% more 100: ~62% more 105: ~70% more 110: ~77% more 115: ~82% more 120: ~86% more
As you can see, the curve flattens out. It flattens out because you’re getting closer and closer to have sufficient money that the returns can sustain you perpetually (at a 5% return, which is pretty conservative, at $200k, you can perpetually take out $10k, and no further increase in life expectancy will change that).
Now, that of course is not in any way an insignificant increase, but if we assume 40 working years, $100k is about $850/year additional investment + compounding investment return at 5%. $186k is around $1550/year compounding.
But here’s the thing, if you work 10 years longer, you grow it disproportionately much, because you delay starting to take money out, and you need less, while you get the compounding investment return of ten more years, and that drives down the yearly savings you need to make back down to around $850/year.
So an increase of 40 years of life expectancy “just” requires 10 more years of work to fully fund it assuming the same payment in during the later years. But here’s the thing: Most people have far higher salaries towards the end of their careers, even inflation-adjusted, so most people would be able to fund 40 more years with far less than 10 extra years of work.
(Note that if you already were on track for your pensions to last you to 90, if you were pre-retirement now, you’d “only” need about 35% extra savings to have enough until 120, because you’d get returns from a higher base, so the extra savings or extra years of work needed over what you managed would be even lower)
These all work on averages btw. - due to differences in health, this is where we really want insurance/state pensions rather than relying on individual contributions.
This doesn’t mean there aren’t problems to deal with. Especially if the life expectancy grows fast enough that it “outpaces” peoples ability to adjust. But it’s thankfully not quite as bad as having to add another 30 years of work.
Most of our financial advice for retirement has a hidden assumption that there is a large number of working age people helping not just social security, but also the stock market. A standard retirement portfolio will have a mix of t-bonds, stock market holdings, and a few other sectors.
We’d be looking at a scenario where there are a lot of small investors (a few million dollars is small on this scale), but proportionately fewer workers making use of that investment.
A US Millennial working today is going to need to be a 401k millionaire to retire with something comparable to their current standard of living. Most are going to fall short of that before we even talk about adding on extra life span.
The numbers I gave are entirely independent of social security. They presume a far below average stock market return. You’re right they’ll need to be a 401k millionaire, and per the numbers I gave, to achieve that will take around ~9k/year in pension investments if they intend to retire at 65. A lot obviously can not afford that, especially not early in their career, and will need to compensate accordingly later in their career to the extent they want.
But that wasn’t really my point. My point is that the number of extra years - irrespective of your current pension situation - you need to work in order to maintain the same financial outlook is far lower than the number of additional years of retirement you can cover. Whether or not you’re able to get to a sufficient pension level in the first place is a separate issue.
To how the stock market will fare, the big challenge there is whether or not automation will keep up or not, and frankly I think the biggest social upheaval over the next century will not be that it can’t keep up, but that automation will outpace the proportional decline in the potential labour pool.
You might want to look at the Trinity Study of retirement portfolios. The general rate of withdrawal is lower than what you’re quoting here. Closer to 4% or lower. Though this is giving way in some quarters to a sliding system, where you live it large in good return years, and frugaly in bad years.
But again, this all overlooks how that depends on a proportion of working people feeding stock market returns.
The general rate of withdrawal need to be lower if you have a portfolio that is very conservative. That may make sense when you’re saving for you yourself and have a low risk tolerance, but it’s not needed. That people feel worried enough to do that, though, is a good argument for insurance/state run pension schemes, because they an inherently pay out more since they can smooth out the risks and pay toward the maximum averaged returns.
Economy is about to break soon anyway. Technology increasing to a point of killing a dangerous amount of jobs combined with a declining birth rate…
We’re gonna have to do something in the next couple decades. There’s really no other option unless the elites want chaos… and they don’t.
Also, the point would be that you live longer. I know a lot of people hate their jobs but not everyone does. I wouldn’t mind getting another 30 years.
I think things are gonna get really ugly in the next twenty years.
We’re nearing a point where artificial intelligence can replace a lot of white collar and logistical jobs, which would skyrocket unemployment rates and lead to widespread riots.
Don’t get me started on what a leftist pipe dream universal basic income is. The guaranteed income UBI would give would either bankrupt our economy or be such a pittance that nobody could live off of it
I did number crunching on how much it would cost to pay every UK adult a guaranteed basic income that could theoretically pay for rent in most cities outside of London, assuming £800 pcm and 50,000,000 adults. That would cost £480,000,000,000 a year, or almost 2.5 times our entire welfare budget, of which about £100b alone goes into pensions.
And before you suggest automation and wealth taxes would pay for UBI… good luck with that. We can’t even get the rich to pay their fair share of taxes right at this moment.
Given how much politicians serve the rich, I think they’d sooner sic the military on protesters than actually cave in to the demands of the masses, especially when armed drones could do a lot of the gruntwork. The wealthy don’t care if you’re destitute, starving and living on the streets.
UBI isn’t a leftist idea
It’s a more radical version of welfare capitalism. Socialism is about worker control of the means of production. This would mean all the factories and agricultural land and cloud servers, etc would be owned by the people who work there. UBI is simply keeping the poor alive through subsidies. We do it already through all sorts of things. For example food prices are heavily subsidized. It’s just taking that idea and taking it to the logical extreme.
It’s not leftist at all. Leftists may support it because it will improve the living conditions for the bottom class. But fundamentally it does nothing to put the means of production into the hands of the workers. A leftist idea would be for example forcing all private companies to become cooperatives.
I agree with you that things are going to get ugly very soon. Our society simply isn’t equipped to handle this dramatic transformation that is coming. I think we will likely see some sort of serious war going forward as well. I’m just glad I live far enough away from the likely nuclear bomb targets where I probably wouldn’t die immediately, lol.
I think UBI is really the only solution that will be able to maintain our current capitalist system and way of life. Anything else would essentially lead to revolt. Idle hands are the devil’s plaything. If 50% of the young people in the country aren’t working, you’re either going to see a massive prison complex or a militant revolt. Probably both.
UBI however would further our jump into dystopia. Imagine a society where the bottom 80% survive off of the government’s hand. They live in ghettos, segregated from the people who own capital. Majority of the country live in abject poverty getting only basic necessities. Starting to sound a lot like 1984…
But it is. It may not be Communist or Socialist but it’s a radical idea to redistribute wealth to the masses and effectively create a literal welfare state. Pretty much every party that supports UBI is left wing.
I think we’ll see a full societal collapse in the next few decades, whether that’s a descent into lawless anarchy or civil wars.
deleted by creator
My great grandma died at 101 earlier this year. She had ran out of money a while ago, but she had so many descendants at that point that everyone took turns caring for her. One of her daughters lived with her and the other 6~7 children all pitched in.
She never had to stay at a home. That’s a nice thing about being old as shit, assuming you had at least some children. Your descendants exponentially increase allowing you to draw money from a significant pool of people.
I flew into the country to visit her for her 100th birthday and there were almost 100 people there, majority family members.
Things will need to change like a guaranteed basic income. We’ve been moving towards this eventuality for the last 5 decades or so.
Maybe this is an unpopular opinion, but I don’t think working till very late age is a bad thing. I don’t expect to be sitting on my ass whole day long by the time I get to retirement age. What I do think is a bad thing is if by that time I am financially struggling to get by.
The problem is we’re not fixing the economy at the other end. People work later because they’re healthier, and that could be good… but that means more people to do the same amount of work, increasing unemployment.
Until we stop demonising non-work and that’s going to be hell for those stuck on it. Get some level of basic income so it’s a valid choice. Meanwhile in the UK our govermnent is appealing to the boomers by announcing increased punishment of the unemployed… We’re a long way from fixing the issues.
I don’t tend to think about the amount of work available nor the demand for the fruits of work to be fixed.
I agree with the issues you are raising.