How Global Demographics & Monetary Policies are Affecting the World’s Retirement Systems Supercentenarian Longevity: Secrets of the Oldest Old
L. Stephen Coles, M.D., Ph.D., Lecturer, UCLA Molecular Biology Institute Department of Chemistry and Biochemistry Los Angeles, California; USA British scientists analyzed the vast amounts of EtOH consumed by superspy James Bond, 007, in Ian Fleming’s novels and concluded that he would contract alcoholic hepatitis, cirrhosis, impotence, and die of liver disease by the age of 56 years. Sean Connery Arnold Schwarzenegger, former Governor of California Clint Eastwood The Phenotype of Aging Tom Cruise Women Are No Exception to the Rule
Elizabeth Taylor Bridget Bardot, now 79+ Raquel Welch, now 73+ Cher Lisa Gherardini (who died in 1542 AD) suggested as a model for Leonardo da Vinci’s “Mona Lisa” (“La Gioconda”)(Louvre Museum; Paris, FRANCE) Archeologists have now unearthed a skeleton in a monastery in Florence, ITALY and will do DNA analysis to confirm identity Marathon in Hamburg, Germany (May 2014) But Some Age Better Than Others – Record Marathon Times
We’re Getting Old — Very Old
• Population aging is a world-wide phenomenon • Over next several decades, the proportion of elderly persons (65+) in all major industrial countries will increase rapidly as the share of the total adult population declines • For example, in the U.S., there were • 35 million adults age 65+ in 2000 • 50 million in 2010 • 70 million, or 1 in 5 Americans, in 2030 % Population Age 65+ [2000 – 2020]
Percent Change, Country 2000 2020 2000–2020 Japan 17.1 26.2 53.7 Canada 12.8 18.2 42.9 Australia 12.1 16.8 39.2 New Zealand 11.6 15.6 33.7 United States 12.5 16.6 32.8 Germany 16.4 21.6 31.9 France 15.9 20.1 26.4 United Kingdom 16.0 19.8 23.6
Source: United Nations % Population Age 65+ [2000 – 2020]
Japan Germany France United Kingdom Canada Australia United States New Zealand % Population Age 80+ [2000 – 2020]
Japan
Germany
France United Kingdom Canada United States Australia New Zealand Why Is That? We are having fewer children and living longer, much longer on the average
In fact, in 1889, the first Social Security Law was enacted in Germany by Prince Otto von Bismarck (the "Iron Chancellor" under Kaiser Wilhelm, II), when those retiring at 65 had only a five (5)-year life expectancy (on average) [and most workers died before they even could retire]. Life Expectancy by Country and Gender in 2000 and 2020
2000 2020 Country Men Women Difference Men Women Difference France 75.0 82.5 7.5 77.0 84.2 7.2 Japan 77.2 83.3 6.1 78.8 84.9 6.1 United States 74.2 80.6 6.4 76.8 82.6 5.8 Germany 74.7 80.7 6.0 77.0 82.7 5.7 Canada 76.6 82.3 5.8 78.4 84.0 5.7 Australia 76.0 81.6 5.7 78.0 83.4 5.5 New Zealand 74.9 80.5 5.6 77.2 82.5 5.3 United Kingdom 75.3 80.6 5.3 77.3 82.6 5.3
At Age 65, People Live, on Average, Another 15 to 22 Years At Age 80, people live, on average, another 7 to 10 years So What? • The social/economic implications of population aging in developed countries are extremely serious • Large effects on financial markets due to changes in saving rates and the demand for investment funds • Also, significant changes in labor force • As the median age of the world rises from 29 to 38 by 2050, the labor force will shrink and more people will retire, leaving fewer younger workers to sustain growth and sapping the vitality of economies all over the world • Italy, for example, will need to raise retirement age to 77 or admit 2.2 million immigrants annually to maintain its worker-to-retiree ratio Supercentenarians
Guinness Book of World Records / Who is a Supercentenarian? • As of today (Thursday, June 19, 2014), there were 74 Validated Living Supercentenarians World Wide (USA : non US = 22 : 52) (Female : Male = 72 : 2)! • Once you were to make it to becoming a Supercentenarian, the chances of living even one more year to 111 is like flipping a coin! (H:T or a 50% mortality rate) • Therefore, these individuals are a very precious resource for humanity, and we need to act quickly; otherwise, whatever they have to teach us about how they managed to live so long will be lost forever The Oldest Documented Supercentenarian in History
40 years 120 years According to the Guinness Book of World Records, the oldest documented Supercentenarian in history was French woman Madame Jeanne-Louise Calment, who died in 1997 at 122 years, 164 days The Oldest Documented Supercentenarian in History: The Calment Limit Supercentenarian Life Styles
Calment 122.4 Okawa 116 Mortensen 115.7 Barwis 113 Rectangularization of Longevity While Prof. James Fries’s “Compression of Morbidity" hypothesis may not be entirely correct, there is a definite “Rectangularization” of the human longevity curve, and it is becoming stronger with the passage of time
If we take Japanese centenarians as one example… • In 1992, there were 3,000 centenarians; oldest person = 114 years • In 1998, there were 10,000 centenarians; oldest person = 114 years • In 2009, there were 40,000 centenarians; oldest person = 114 years
Rather than seeing an increase in the maximum ages, as expected, we are seeing an increase in the mortality rates instead, especially at ages 112, 113, 114, and 115, with very few persons anywhere reaching age 116 (last occurrence was 2006) and age 117 or more turns out to be an extreme outlier (last occurrence was in 1997) Oldest by Country
Country Age France 122 (While Jeanne Calment reached age 122, she definitely was not walking around at age 120) UK 115 (The oldest British person since modern birth registration began in 1837) Spain 114 Italy 114 Sweden 113 Mortality Plateau for Fruit Flies
1. Christopher Driver, “Opinion: A Further Comment on Why the Gompertz Plot Does Not Measure Aging” Biogerontology, Vol. 4, pp. 325-7 (2003). 2. James R. Carey, et al., “Slowing of Mortality Rates at Older Ages in Large Medfly Cohorts,” Science Vol. 258, No. 5081, pp. 457-61 (1992). Is There a Mortality Plateau?
(Oxford University Press, New York; 2011) Figure 11-2; p. 134 Supercentenarian Mortality Rates
Data provided by Messrs. Robert D. Young of Atlanta GA and Mark E. Muir of Virginia, GRG Database Administrators Hypothesis: Nature, Not Nurture Causes Aging & Senescence
• Potential Longevity (Both Average Life Expectancy & Maximum Lifespan) Lies in the expression of our genes (including Epigenetics) • Longevity-Determining Genes (a few hundred genes out of 20,000+/-) & not our environment or life-style dictate how long we may be able to live • None of our Supercentenarians took supplements • Our greatest system vulnerability is vascular fragility (we have ~60,000 miles of blood vessels) Instantaneous Mortality Rate (Gompertz’s Law for Actuaries) Instantaneous Mortality Rate (Gompertz’s Law for Actuaries) Female Advantage Female:Male Overall Ratio ~10:1. And by age • 110 Years 90 percent are women • 112 Years 92 percent are women • 115 Years 95 percent are women Why is that? 1. Women Deliver Babies (C-Sections) 2. Men Fight for Species Survival (T, Cortisol) 3. Estrogen? (Post Menopausal > ½ Life) 4. “XX” (Mosaic) and not “XY” (Y = tiny) Supercentenarian Genome Project (IRB approval July 2010)
The SRF in collaboration with… • UCLA (Dept. of Chemistry and Biochemistry Molecular Biology Institute) • Stanford University (Depts. of Developmental Biology and Human Genetics) • Institute for Systems Biology of Seattle, WA • Complete Genomics of Mountain View, CA Two Subjects from San Diego, CA Soledad Mexia, 114 years [1899 - 2013] & Frederica Maas, 111 years [1900 – 2012] Soledad Mexia, 112 years
Chula Vista, CA; June 30, 2012 Hinco Gierman, Ph.D.; July 1, 2012 Marion Higgins of California, 112 years & Maria Capovilla of Ecuador, 116 years Delma Kollar of with Granddaughter Syd Bergeson 114 years Creswell, OR [10/31/1897 – 01/24/2012] Besse Cooper, 115th Birthday Party [Aug. 26, 1896 - Dec. 4, 2012] 116 years,100 days Mississippi (Sweetie) Winn & Great Niece, Mary Hollins 113 years Shreveport, LA [1897 - 2011] Germaine Degueldre of BELGIUM 111 years [September 26, 1900 - May 11, 2012] Marie-Therese Bardet of FRANCE 112 years Died: June 8,2012 at age 114 Walter Breuning World’s Oldest Man - 114 years Great Falls, MT [1896 - 2011] Mansoor Pazargad of IRAN 113 years [1896 - 2011] Jan Goossenaerts of Belgium 111 years [1900 - 2012] Mrs. Elsie Thompson 112 years Died March 21, 2013; 113 years, 350 days Clearwater, FL Beulah Christie 110 years Melbourne, FL; died at 111 years Antonia Gerena-Rivera 110 years Miami, FL (Born in Puerto Rico)
(Insert Photo from Visit on Sunday, May 1, 2011, 4:00 PM EDT) Maria Gomes Valentim 114 years Carangola, Minas Gerais, Brazil [1896 - 2011] Avice Clarke 111 years Placerville, CA , Born in England [05/17/1900 - 01/17/2012] Mr. James F. McCoubrey 111 years [1901 - 2013] St. John’s, Newfoundland; Halifax, Nova Scotia; Cambridge, MA; Walnut Creek, CA Dominga Loera Velasco 111 years Born: May 12, 1901; Oakland, CA
Marriage to Salvador in 1928 Dr. Alexander Imich, Ph.D. 111 years Born in Poland & Resided in NYC (Confirmed as World’s Oldest Man – May 12, 2014) [February 4, 1903 – June 15, 2014] The Cost of DNA Sequencing is Falling
2000 $3 Billion (Shot-Gun of a Mosaic) 2005 $100 Million (Craig Venter, James Watson) 2010 $1 Million 2011 $200 K (George Church at Harvard) 2012 $4 K 2013 $1,000 (Illumina) 2015 $200 (nearly all newborns will be sequenced) Cost of DNA Sequencing Falls Average Life Expectancy (years) Argument: What if Ray Kurzweil is right?
Era Life Expectancy (years) 1. 100 KYA (Hunter/Gatherers) 18 2. 5 KYA (Ancient Egypt) 25 3. 1400 AD (Middle Ages) 30 4. 1800 (USA) 37 5. 1900 (USA) 49 6. 2000 (USA) 78 7. 2045 (Singularity) Biological Escape Velocity
How Global Demographics & Monetary Policies are Affecting the World’s Retirement Systems Supercentenarian Longevity: Secrets of the Oldest Old
L. Stephen Coles, M.D., Ph.D., Lecturer, UCLA Molecular Biology Institute Department of Chemistry and Biochemistry Los Angeles, California; USA How Global Demographics and Monetary Policies are Affecting the World’s Retirement Systems: Interest Rate Risk
Robert C. Merton School of Management Distinguished Professor of Finance MIT Sloan School of Management Effect of Interest Rate Level on Retirement Funding Price of $100,000 per year Inflation-Protected Life Annuity Beginning at Age 65
2.1
2
1.9
1.8 11 A 1 T
1.7 r 1 r
1.6
1.5
AnnuityPrice millions) ($
1.4
1.3
1.2 -1.0% -0.5% 0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% Real Interest Rate 65 Effect of Interest Rate Level on Retirement Funding Price of $100,000 per year Inflation-Protected Life Annuity Beginning at Age 65 Present Value of Annuity ($ millions) Real Interest Rate Difference in Difference in Current Age 4.13% 1.50% Cost (%) 0.50% Cost (%) 65 $1.30 $1.64 26% $1.81 10% 60 $1.06 $1.52 44% $1.76 16% 55 $0.87 $1.42 63% $1.72 22% 50 $0.71 $1.31 86% $1.68 28% 45 $0.58 $1.22 111% $1.64 34%
66 Effect of Interest Rate Level on Retirement Funding Price of $100,000 per year Inflation-Protected Life Annuity Beginning at Age 65 Annuity Price at Interest Rate R Ratio: Annuity Price at Interest Rate r
4.1% 0.62 0.69 0.72 0.79 0.87 1.00 2.5% 0.71 0.79 0.83 0.91 1.00 1.15 1.5% 0.78 0.86 0.91 1.00 1.10 1.26 Interest Rate R 0.5% 0.86 0.95 1.00 1.10 1.21 1.39
0.0% 0.90 1.00 1.05 1.16 1.27 1.46
-1.0% 1.00 1.11 1.16 1.28 1.40 1.62 -1.0% 0.0% 0.5% 1.5% 2.5% 4.1% Interest Rate r 67 30-year UST TIPS Interest Rates 2007 -2014
30-year TIPS Bond Yield 3.50
3.00
2.50
2.00
1.50 Yield (%) Yield
1.00
0.50
0.00
-0.50
2008-09-01 2009-03-01 2009-09-01 2010-03-01 2010-09-01 2011-03-01 2011-09-01 2012-03-01 2007-01-01 2007-03-01 2007-05-01 2007-07-01 2007-09-01 2007-11-01 2008-01-01 2008-03-01 2008-05-01 2008-07-01 2008-11-01 2009-01-01 2009-05-01 2009-07-01 2009-11-01 2010-01-01 2010-05-01 2010-07-01 2010-11-01 2011-01-01 2011-05-01 2011-07-01 2011-11-01 2012-01-01 2012-05-01 2012-07-01 2012-09-01 2012-11-01 2013-01-01 2013-03-01 2013-05-01 2013-07-01 2013-09-01 2013-11-01 2014-01-01 2014-03-01 2014-05-01
30-year 3-5/8% 2028 TIPS 30-year TIPS, constant maturity
68 Wrong Risk Measure: Retirement Funding has an Income Goal But DC Investing Focuses on Wealth Accumulation Deferred Real Annuity monthly returns Deferred Annuity: High risk in wealth terms, low risk in income terms
DEFERRED ANNUITY (USD) DEFERRED ANNUITY (INCOME UNITS)
20% 20%
15% 15%
10% 10%
5% 5%
0% 0%
Returns Returns -5% -5%
-10% -10%
-15% -15%
-20% -20% 2/03 12/0310/04 8/05 6/06 4/07 2/08 12/0810/09 8/10 6/11 4/12 2/03 12/0310/04 8/05 6/06 4/07 2/08 12/0810/09 8/10 6/11 4/12 Months Months The volatility of annuity price is high risk when measured The volatility of annuity price is minimum risk in terms of asset value. when measured in terms of income
Annuity returns based on yield from US Treasury Inflation Protected Securities (TIPS). Data provided by Bloomberg. 69 Wrong Risk Measure: Retirement Funding has an Income Goal But DC Investing Focuses on Wealth Accumulation
90-Day US T-bill monthly returns
US T-Bill : Wealth preservation does not mean income preservation.
3-MONTH US T-BILL (USD) 3-MONTH US T-BILL (INCOME UNITS)
20% 20%
15% 15%
10% 10%
5% 5%
0% 0%
Returns Returns -5% -5%
-10% -10%
-15% -15%
-20% -20% 2/03 12/0310/04 8/05 6/06 4/07 2/08 12/0810/09 8/10 6/11 4/12 2/03 12/0310/04 8/05 6/06 4/07 2/08 12/0810/09 8/10 6/11 4/12 Months Months The volatility US T-bill price is minimum risk when measured The volatility of US T-bill price is high risk when in terms of asset value. measured in terms of income.
Based on T-bill data provided by Bloomberg. Past performance is no guarantee of future results. 70 How Global Demographics and Monetary Policies are Affecting the World’s Retirement Systems: Interest Rate Risk
Robert C. Merton School of Management Distinguished Professor of Finance MIT Sloan School of Management