Monday, July 28, 2014

Work till you drop.

Work till you drop .


Andre Willers.
29 Jul 2014
Synopsis:
If pension funding is kept the same as at present , then the general retirement age would have to be about at age 75 .
 
Discussion :

1.The government retirement basis was mainly set up in 1930 . See Appendix A
2.The retirement ages remained the same . Little change was made in reserve provisions due to political unwillingness to raise taxes as life-expectancy increased .
3.The result is a huge pension shortfall , now coming home to roost as baby-boomers begin to retire .
4.Raising the retirement age is being done .
5.We calculate the retirement ages for the same mortality as at 1930 .
See Appendix C and Appendix B.

6. New Retirement ages .
Male future retirement 2010 - 2100                                                        
Age increases from 73 to 81, with life expectancy at 11 years essentially the same as in 1930 .
                                                               
Female future retirement 2010 - 2100                                                   
Age increases from 71 to 78, with life expectancy at 14 years two years less than in 1930 .
 
7.Doing the same using persons alive at the retirement age(Tx) (an indicator of reserves required) , gives the same approximate result .
Comparing Tx of 1930 with 2010 figures indicates that the 2010 pensions would only be 45%  funded . (45=100/2.2)
Moody’s Estimate in 2013 is 48% . See
“The report, released today, examined pensions in every state and found that the total funded ratio, which measures assets relative to liabilities, fell to 48 percent under its new methodology from 74 percent before the changes. The ratio measures fund management and whether a state is keeping up with promises to retirees.
 
8.Great social instability results .
Retirees are abruptly poorer , as well as a charge on the fiscus .
As GINI rises , the new aristocracy and oligarchs consume more resources at the expense of the erstwhile middle-classes .

9.Choices :
9.1 Work till you drop . (Extend retirement age till 75)
9.2 Revolution . (Take from the rich)
9.3 War . (Take from other countries)
9.4 General assisted euthanasia .(Reduce population and old/sick/poor)
9.5 Famine and plague .(The result of overpopulation )
9.6 Everybody grows super-rich (ie Singularity) .
Once a real possibility , but increasingly remote as human greed erodes the future .
It seems that this option is being pre-empted by oligarchs.
This attractor can be eco-stable in the ancient Egyptian sense : Small Hi-tech eco-aristocracy and a large low-tech serf class, with some mobility between classes .
Some countries are already nearly there .

Humans should have stuck with what they could handle : a Neolithic fishing village .
 
Curmudgeonly yours
Andre
 
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Appendix A


The Origins of the Retirement Age in Social Security
By the time America moved to social insurance in 1935 the German system was using age 65 as its retirement age. But this was not the major influence on the Committee on Economic Security (CES) when it proposed age 65 as the retirement age under Social Security. This decision was not based on any philosophical principle or European precedent. It was, in fact, primarily pragmatic, and stemmed from two sources. One was a general observation about prevailing retirement ages in the few private pension systems in existence at the time and, more importantly, the 30 state old-age pension systems then in operation. Roughly half of the state pension systems used age 65 as the retirement age and half used age 70. The new federal Railroad Retirement System passed by Congress earlier in 1934, also used age 65 as its retirement age. Taking all this into account, the CES planners made a rough judgment that age 65 was probably more reasonable than age 70. This judgment was then confirmed by the actuarial studies. The studies showed that using age 65 produced a manageable system that could easily be made self-sustaining with only modest levels of payroll taxation. So these two factors, a kind of pragmatic judgment about prevailing retirement standards and the favorable actuarial outcome of using age 65, combined to be the real basis on which age 65 was chosen as the age for retirement under Social Security. With all due respect to Chancellor Bismarck, he had nothing to do with it.
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Appendix B
Definition of terms
q(x) is the probability that a life aged exactly x will die in the next year ie, before attaining exact age x+1
e(x)
Life expectancy is the expected (in the statistical sense) number of years of life remaining at a given age.[1] It is denoted by e_x,[a] which means the average number of subsequent years of life for someone now aged x, according to a particular mortality experience. Because life expectancy is an average, a particular person may well die many years before or many years after their "expected" survival. The term "maximum life span" has a quite different meaning. The "median life span" is also a different concept although fairly similar to life expectancy numerically in most developed countries.
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Appendix C
Finding new expected retirement ages in 21st century using same reserve requirements as 1930 .
Mortality tables
Find future age with same mortality as 1930 mortality .
Old Retirement Ages with mortality and life expectancy
Male
Female
Year
Age
Mortality
Life Exp
Retire
Age
Mortality
Life Exp
Retire
x
q(x)
e(x)
x
q(x)
e(x)
1900
65
0.041585
11.35
60
0.026266
14.96
1910
65
0.041512
11.38
60
0.024240
15.16
1920
65
0.037141
11.81
60
0.022675
15.48
1930
65
0.039454
11.83
Retire
60
0.021874
16.04
Retire
1940
65
0.038116
11.92
60
0.038113
16.78
New Retirement Ages with estimated mortality and life expectancy
Male
Female
Year
Age
Mortality
Life Exp
Retire
Age
Mortality
Life Exp
Retire
x
q(x)
e(x)
x
q(x)
e(x)
2010
73
0.036823
11.26
Retire
71
0.020745
14.99
Retire
2010
74
0.039951
10.67
72
0.022548
14.30
2020
74
0.036556
11.17
Retire
72
0.020818
14.84
Retire
2020
75
0.039864
10.57
73
0.022617
14.15
2100
81
0.039454
10.12
Retire
78
0.020648
14.19
Retire
2100
82
0.044491
9.51
79
0.022264
13.48
New Retirement Ages with  life expectancy
Male
Female
Year
Age
Life Exp
Age
Life Exp
2010
73
11
71
14
2020
74
11
72
14
2100
81
10
78
14
Male future retirement 2010 - 2100
Age increases from 73 to 81, with life expectancy at 11 years essentially the same as in 1930 .
Female future retirement 2010 - 2100
Age increases from 71 to 78, with life expectancy at 14 years two years less than in 1930 .
Reserves for retirement using 1930 standards would then be adequate .
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