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People 05 Apr 2017

'Young' at 65: redefining the threshold of old age and retirement

The debates about potential impact of ageing for institutions and economies, the fiscal sustainability of the pension and welfare systems are based on a convention that was established one century ago: the definition of 65 years as the fixed threshold at which old age and economic dependency begins.

But societies of the early 21st century bear very little resemblance to those that existed one hundred years ago: In Sweden, in 1914, life expectancy was 58 years. In 2014 it was 82.  The Social Security act was signed in 1935 in the U.S. Then, it was estimated that, on average, a 65 year old person would go on living for about 13 years more. Today, the remaining life expectancy is 19 years. Male Spaniards are expected to live 23 years more after crossing the 65 barrier, compared to just 15 years a few decades ago.

Sergei Scherbov, director of Demographic Analysis at the Wittgenstein Center for Demography and Global Human Capital (Vienna), says that we need to rethink the way in which we measure ageing. Delving deeper into this question, on March 21 he offered a conference, entitled Reconsidering ageing: are 40 really the new 30?, at the BBVA Foundation, as part of the Demography Today cycle of conferences organized by the Foundation and the CSIC (the Spanish National Scientific Research Council).

“Ageing is not a one-dimensional process, but has several dimensions, and chronological age is only one of them,” he said. “Two 60 year old women living in Japan and Burkina Faso have nothing to do with each other. And, at 40, the remaining life expectancy for a Spanish woman is the same as it was for a 30 year old woman in the 1960s.”

40 are the new 30

In 2010, Scherbov and Warren Sanderson proposed in Science the concept of ‘prospective age.’ Just as economic science uses a constant value to calculate a currency’s inflation over time, prospective age also compares the ages of different periods of time taking into account the increase in life expectancy, using life-expectancy models that are similar to price indexes.

Thus, if the life expectancy of a 40 year old Spanish woman today is the same as it was for a 30 year old woman half a century ago, we can say without fear of error, that the 40s are the new 30s.

Two 60 year old women living in Japan and Burkina Faso have nothing to do with each other

Prospective age is determined based on personal characteristics, such as the remaining life expectancy. Scherbov and Sanderson suggest that we should start considering that people reach the old age at the age at which their remaining life expectancy is 15 years or less, regardless of their chronological age at that time: 65, 58 or 73.

But this is only one part of the equation: Physical and cognitive capabilities are also crucial, because the increase in life expectancy also entails remaining healthy longer too.

A handshake to reveal the biological life

One of the parameters they propose measuring is grip strength, a medical test that has turned out to be a consistent indicator of future life expectancy and morbidity rates (i.e., the percentage of people that fall ill in a specific place at a specific time) and which can also be used as a reliable indicator of ageing: a handshake can say how long one’s going to live for.

Redefining the concept of old age is intimately related to dependency growth forecasts. The traditional dependency ratio (defined in the middle of the 20th century) calculates how many citizens aged 65 or older there are in a country compared to 20-64 year old citizens, considering that the latter, the working population, need to support economically the non-working population.

Based on this criterion, the dependency ratio has been growing more and more in the past decades. However, applying the personal characteristics approach, where dependents are those that have a remaining life expectancy of 15 or less years, future forecasts of the dependency ratios show a much less dramatic growth. This is the case of the United Kingdom, for instance: if the traditional dependency ratio predicts a 33% increase by 2030, with these ne parameters, the increase is only 13%.

Lower burden for health systems

As regards the burden for health systems, this new approach also estimates that it is significantly lower than using traditional parameters. Scherbov and Sanderson have created an indicator that takes into account the fact that people of more advanced ages incur in higher health costs in the later stages of their lives, and therefore, the growth in life expectancy entails that these higher costs appear at more advanced ages.

Following this criterion, Japan’s health costs should only increase by 14% between 2013 and 2030, whereas using the traditional 65 year parameter, this increase would be 32%.

With this approach, the calculation of the retirement age should also be updated, just as some countries are already doing, including Spain. “Calculating the retirement age based on life expectancy changes would ensure a balanced contribution to pension systems,” explains Scherbov.

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