Sometime this year we'll pass a milestone: For the first time in history, there will be more Americans over 65 than there are under 15.
How do we plan for a society that has more old people than children? What does the combination of greater longevity and advances in efforts to stretch the human life span — perhaps to 120 years and beyond — mean for plan advisors?
Dr. Laura L. Carstensen, PhD, tackled these questions in her presentation at the 2015 NAPA 401(k) Summit on March 23. Carstensen, a psychology professor, is the Farleigh S. Dickinson Jr. Professor in Public Policy at Stanford University and the founding director of the Stanford Center on Longevity.
Crediting a Stanford economics colleague, Carstensen offered a provocative question: Instead of measuring human life starting at birth, what if we measured it by the time we have left, actuarially speaking? "When you reach the point where there is a 2% chance you wil die in the next two years, we'll call you old," she suggested. Carstensen traced the history of how that definition would have applied in the past: In 1970, on average, that point was reached at age 59; in 2000 it was age 65. And last year a German researcher estimated it at 70.
What does current research tell us about what old people are like today? The answer: They are well educated, healthy, knowledgeable and emotionally stable. Additionally, Carstensen noted, a recent Gallup poll found that levels of anger and stress drop off precipitously after 50.
"When it comes to cognition, though, the news is not so good," Carstensen continued. "Humans' capacity to learn begins to decline at about age 23. In fact, the drop from age 23 to age 30 is greater than from 70 to 80." Despite our diminished capacity to learn, however, our store of knowledge continues to grow because generally knowledge is not lost, and continues to accumulate.
As is widely recognized, work at an older age seems to help this because it provides much-needed cognitive stimulation. In fact, researchers are now trying to quantify how the presence of older workers affects productivity in different types of workplaces. Carstensen cited a study conducted at a BMW plant which found that among work teams made up of all young workers, all old workers and a combination of young and old workers, the latter teams were the most efficient — while they produced less product than the young teams, they made almost no mistakes.
"All this research will change how we think about working longer," Carstensen declared. "We know that the workforce will be older, better educated, more able, and more diverse in age and ethnicity," she noted.
In general, they will also be less financially able to retire. Carstensen noted that today, not many retirees are able to finance a retirement that lasts 20 years. "If people are living longer and retiring earlier, how will they finance even longer retirements?" she asked. The result: a retirement crisis.
What can plan advisors and other financial professionals do about to get ahead of that crisis? Carstensen offered three ideas:
- Continue to push and expand automatic plan features.
- Strive to better understand the psychological aspect of retirement saving. In particular, research has found that new technologies are very effective in helping participants relate to their future selves.
- Do a better job of telling younger participants about the good things about being old — transforming old age from a source of dread into something to look forward to, and thus to plan for.
