Will Americans Die Young Enough To Save Pension Plans?

Authored by Doug French via The Mises Institute,

“Pension fund problems worsen in 43 states” says the Bloomberg headline.

Laurie Meisler writes,

New Jersey, Kentucky and Illinois continue to lose ground and now have only about one third of the money they need to pay retirement benefits. And three states had double-digit declines in their pension funding ratios in the past year: Colorado, Oregon and Minnesota - though some of this can be attributed to actuarial changes in the way pension liabilities are calculated.

Nevada PERs is thinking about making a change, from assuming 8% investment returns to 7.5%. The higher the assumed rate, the less future beneficiaries have to contribute.  And, ultimately, Sean Whaley writes for the LVRJ,

The assumptions are used to ensure the solvency of the plan over the long term for the approximately 105,000 active members and 54,000 retired and disabled members. Because the public retirement plan is a defined benefit plan where retirees get a fixed monthly pension, taxpayers are ultimately responsible for its fiscal health.

Nevada PERS Executive Officer Tina Leiss said NvPERs funding ratio of 74.1 could drop if the returns assumption is lowered.

The good news (or maybe it"s bad news) is “Americans are retiring later, dying sooner, and sicker in-between” says Bloomberg. Ben Steverman writes,

Data released last week, reports Bloomberg,  suggest Americans’ health is declining and millions of middle-age workers face the prospect of shorter, and less active, retirements than their parents enjoyed.

The mortality rate increased 1.2% from 2014 to 2015, the first time its increased since 2005 and the first time it"s jumped over 1% since 1980.

Full social security benefits don’t kick in until a person is 66+ now, so,

“Almost one in three Americans age 65 to 69 is still working, along with almost one in five in their early 70s.”

That sounds okay, except, University of Michigan economists HwaJung Choi and Robert Schoeni have studied middle-aged folks and found,

“the number of middle-age Americans with ADL (activity of daily living) limitations has jumped: 12.5 percent of Americans at the current retirement age of 66 had an ADL limitation in their late 50s, up from 8.8 percent for people with a retirement age of 65.”

Then you might say, well, I might not be able to get around, but at least my mind is sharp. Except, “Cognitive skills have also declined over time. For those with a retirement age of 66, 11 percent already had some kind of dementia or other cognitive decline at age 58 to 60, according to the study. That’s up from 9.5 percent of Americans just a few years older, with a retirement age between 65 and 66.”

Maybe that’s why people are either killing themselves quickly - suicide - or slowly with alcohol, drugs, or overeating.  

This is all good news for pension plans...

As life expectancy drops - The Society of Actuaries says a 65-year-old man can expect to live to 85.6 years, and a woman can expect to make it to 87.6.

So - the group calculates a typical pension plan’s obligations could fall by 0.7 percent to 1 percent.

That"s a start but it won’t do much good, in New Jersey, Kentucky and Illinois.

*  *  *

Simply put, we"re gonna need a bigger die-off - or perhaps a few more years of unhealthy living will start to really help.

The New American Dream: Work Longer, Live Sicker, Die Sooner

With stagnant wages, rising cost of living (see shelter inflation), and a lack of savings, Americans are retiring later than ever before (if at all). But in a double-whammy for seniors, whose health is declining, their lifespans are shrinking offering them little if any time to enjoy the end of the American Dream walking hand in hand into the sunset on a faraway beach...

As Bloomberg reports, data released last week suggest Americans’ health is declining and millions of middle-age workers face the prospect of shorter, and less active, retirements than their parents enjoyed.

Here are the stats:

The U.S. age-adjusted mortality rate - a measure of the number of deaths per year - rose 1.2 percent from 2014 to 2015, according to the Society of Actuaries.

That’s the first year-over-year increase since 2005, and only the second rise greater than 1 percent since 1980.

At the same time that Americans’ life expectancy is stalling, public policy and career tracks mean millions of U.S. workers are waiting longer to call it quits.

Almost one in three Americans age 65 to 69 is still working, along with almost one in five in their early 70s.

And finally, Americans in their late 50s already have more serious health problems than people at the same ages did 10 to 15 years ago, according to the journal Health Affairs.

Bloomberg"s Ben Steverman points out that researchers have offered many theories for why Americans’ health is getting worse. Princeton University economists Anne Case and Angus Deaton, a Nobel Prize winner, have argued that an epidemic of suicide, drug overdoses and alcohol abuse have caused a spike in death rates among middle-age whites.

Higher rates of obesity may also be taking their toll. And Americans may have already seen most of the benefits from previous positive developments that cut the death rate, such as a decline in smoking and medical advances like statins that fight cardiovascular disease.

So there you have it - The New American Dream: Work Longer, Live Sicker, Die Sooner...