Is living to 100 going to cause the next financial crisis?

Last Call

While planning for my family’s future, I looked up aging tables and I took two different “life expectancy calculator” tests. The results were both good news and shocking at the same time. The general life expectancy has continually been moving up and, as a result, we have to plan for a longer life than the old common wisdom suggested, with all the consequences that come along with it positive, hopeful and scary, depending on your own level of confidence in what aging might mean.

When discussing these “newly found years” with friends, here are some of the reactions I most often get: “This means I should really work much longer than I expected.” “So my spouse would have to put up with me another x years.” “Do I want to get that old? I hope I will not lose my brain or health along the way,” referring to the difference between “life span” and “health span.”

There are currently two different schools of thought regarding aging. One suggests that we have reached a plateau of how long we can expect to live because the low-hanging fruit of medical preventions (eating right, regular checkups, controlling cholesterol, early detections of risks, etc.) that have been implemented. The other suggests that we are at the verge of medical advancements that will push the live expectancy to a whole new stratosphere.

Besides the personal consequences of having to make new (and hopefully exciting) plans for the possibility of a longer life, there are macro-economic impacts that are considerable: underfunded obligations in form of company- or public entity-sponsored pension plans. In simple words, pension plans are a promise to pay a certain amount to the beneficiaries for as long as they live; but if a whole generation (mainly the baby boomers) refuses to fall within the timetable that has been established a few decades back and extends its life expectancy by just a few years, this will cause a major ripple effect of several trillion dollars on the pension plans’ obligations to pay, and since these plans are not fully funded (generally, company plans are better funded than government plans), the big question becomes: Who is going to pay for this future obligation?

Further compounding this problem is that the actual return from investments that many of the plans have been projecting (typically 7.5 percent) might have been too optimistic compared to the actual historical returns that have been achieved (closer to 5.5 percent, according to, and there is nothing suggesting that this will change in the future.

This is not just an economic problem but also a political problem. It is generally not too popular for business leaders or politicians to announce that the amount of money being paid into the plans is insufficient, but not facing this reality now is only going to compound the problem in the future.

One thing I know for sure is that the baby boomer generation is going to spend more money to “rock on” for a while longer than any previous generation.

If you pair this attitude with the accelerating medical advancements that are made possible through research and technology, you can bet on the fact that the old actuarial tables will have to be revised continuously.


Marc Frey