The future of healthy aging and retirement

As populations age and lifespans increase, retirement systems, health care, and financial planning must adapt, according to speakers at the 2025 Pension Research Council Symposium.

Excerpt: According to Amal Abou Rafeh, chief of the U.N. Program on Ageing, the United Nations forecasts that, by 2050, the global number of persons over age 65 will reach 1.6 billion, double the number in 2021. Moreover, she noted that almost half a billion people will be age 80+, almost triple the number in 2021. In contrast, the number of people below age 25 is likely to decline slightly over that period.

Key to planning for healthy aging and successful retirement is the need for people to accurately perceive their likely longevity, a point highlighted by David McCarthy, University of Georgia professor of risk management and insurance. His research examines two scenarios for aging patterns in industrialized countries. In one, mortality at older ages is “compressed,” such that more people attain older ages but mortality at those oldest ages is unchanged. In the second scenario, mortality is “postponed,” so that more people live very long, but mortality at these ages also falls. His research finds significant evidence of the postponement hypothesis, but compression is also important when forecasting mortality improvements.

Rising old-age longevity also has key implications for retirement savings targets. McCarthy’s calculations show that a man retiring at 62 in 1959 would have needed assets worth 6.4 times his annual spending to be 50% certain that he would not outlive his assets, and assets totaling 13.8 times his annual spending to be 95% certain that he had sufficient assets to sustain old-age consumption. A woman retiring in 1959 would have needed assets amounting to 9.2 times her annual spending to be 50% certain, and 14.94 times consumption to be 95% certain. In 2019 (the latest date for which these calculations are available), the man would need to have saved 10.5 (15.7) times his annual spending to be 50% (95%) certain, whereas the woman would have to have saved 12.1 (16.4) times her annual spending to be 50% (95%) certain.