From the Economist, quoting Megan McArdle quoting the Economist, referring to retirement:
I don’t know if it’s ever going to be realistic that everyone saves enough to spend the last third of their life on vacation.
Well said. They conclude:
As we live progressively longer we must also rethink our retirement expectations. Retiring at the same age that your parents did, or earlier, can no longer be the expectation...
The problem is a double-whammy. First, the cost of keeping people alive goes up exponentially the older they get. Second, the longer people live, the longer they spend "on vacation", reducing the fraction of their life that they spent producing things. The problem is exacerbated for the infirm, who cost even more to keep alive and must (rather than choose, as is the case for the healthy) retire earlier. The result is a larger fraction of our resources going to keep people alive who are not ever going to produce additional resources in return.
If people were paying for those resources out of their pockets it wouldn't be a problem at all. But unfortunately, we have made an open-ended commitment to entirely insulate people from both costs. When thought about in this way, it seems clear that this path can NOT be sustainable.
Addendum: See this post from Arnold Kling:
As McArdle puts it,
Whether you collect a dividend check, get a corporate pension, or live off your social security, your retirement is funded by real claims on the output of people in the workforce.
For any given level of output, more consumption by one group (say, people over 65) is going to reduce what can be consumed by everyone else.
Comments