St. Louis Post-Dispatch Jim Gallagher column
A 65-year-old woman is now expected to hang around another 23.8 years, about 2 1/2 years longer than before.
Such good news for Mom and Pop is a headache for corporate bosses running pension programs. Longer life means more years of issuing pension checks.
Around
The reaction of corporate finance officers runs along the lines of, "Wow. Can we afford this?" says Ackerman. That will increase the pressure to freeze old-fashioned "defined-benefit" plans, the type that promise a monthly check for life.
Most of us want to keep the Grim Reaper waiting. But if you're funding your own pension, through a 401(k) plan and other savings, you may have to save more, or spend a little less in retirement, to avoid outliving your money.
Say you're planning to die broke at age 95 (it's smart to add a cushion over life expectancy in retirement planning). Assuming a 4 percent return, a
American life expectancies have been growing for a century. From 1900 to 2009, the death rate declined by about 1.1 percent per year, according to the actuaries. Give credit to improved sanitation and public health efforts, workplace safety laws and medical advances.
As a result, 75 is the new 68. Today's 75-year-old has the same chance of dying as a 68-year-old in 1970.
The pace of improvement has actually slowed to 0.9 percent per year over the past two decades, perhaps in part because of our growing chubbiness.
The Grim Reaper is racist, sexist and classist.
Well-off people tend to live two or four years longer than poor people. Whites live longer than blacks at the same income level, although well-off blacks live longer than low-income whites, according to a 2006 study based on
White-collar people live longer than blue-collars. A blue-collar man at age 65 has a 1 percent chance of dying this year, according to the actuary mortality tables. A white-collar man has half that chance.
By contrast, auto, transportation and industrial goods workers tend to die at a rate 5 percent above average. Consumer goods, food and drink workers die at a 9 percent faster rate.
The reason for the gap isn't clear. Certainly, truck drivers are killed on the job more often than bankers, but accidents don't really explain the longevity gaps. "Those differences persist well into retirement," says
Employers with death-prone workers ought to be able to reduce the hit on their pensions if they adopt mortality assumptions suited to their industry,
America has seen a long trend away from defined-benefit pensions. Such pensions leave companies on the hook to cover costs, and they don't like it.
Pensions are already under pressure from persistent low interest rates. They force pensions to lower their projections for earnings on their investments. Longer life expectancies make the pressure worse.
Pension deficits to more than doubled last year to
So, expect companies to continue to cancel defined-benefit pension plans in favor of 401(k) plans, in which the worker must bear the risk of outliving his money.
We may live longer and poorer.
WATCH JIM GALLAGHER AND DAVE NICKLAUS DISCUSS OTHER TOPICS IN 'THE BOTTOM LINE' VIDEO SERIES.
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