69.8 -- the New 65

Forty may be the new 30, but the braniacs in charge of the U.S. Social Security and Medicare programs haven't figured out what to do about it. As life expectancies lengthen, so do taxpayer liabilities for pensions and health care with the consequence that, sooner or later, both will default on their obligations to the public.

Warren Sanderson and Sergei Scherbov may have part of the answer. Instead of basing pensions and other benefits upon peoples' chronological age (how long they've been alive), we should consider peoples' "prospective" age (how long they're expected to live.)

The conventional definition says "old age" starts at age 65. But Sanderson, an economics professor at Stony Brook University, and Scherbov, a researcher at the Vienna Institute of Demography, question the relevance of that definition as life spans lengthen. Consider: In 1952 the average 30-year-old French woman had an average life expectancy of 44.7 more years. By 2005, the average 40-year-old French woman had an average life expectancy of.... 44.7 more years. Chronologically, the 40-year-old woman was a decade older. But was she truly "older"? (As you ponder that question, consider that the photo above captures French actress Catherine Deneuve at age 40 in the movie, "The Hunger.")

In their paper, "Rethinking Age and Aging," in Population Bulletin, the demographic duo define "old age" as the age at which, based on the average life expectancy of a given society, a person has 15 years left to live. In the United States, that age is 69.8 -- nearly five years chronologically older than the standard retirement age today. By the year 2045, "old age" is forecast to commence at 72.8.

Think what would happen if "old age" benefits (Social Security, Medicare, pensions) were geared to life expectancy rather than chronological age. Americans would have to work longer before collecting the gold watch and planning for that cruise around the world. But they'd still have a social safety net to cover them when they became frail and infirm. On the flip side, society could far better afford the social safety net. Instead of an "age dependency ratio" of 37.1 "old" people supported by 100 in the working-age population by the year 2045, the ratio would be only 21 per 100.

Sanderson and Scherbov don't go quite that far. On the one hand, they argue that basing pensions on a fixed chronological age provides a windfall for old guys who paid into the system for a fixed number of years then collect benefits over ever-lengthening periods of retirement. On the other, basing pensions on a fixed prospective age would be unfair to older generations. "As life expectancies increase," they write, "they would have to pay into the system for more and more years, only to receive benefits over a fixed average period."

One solution, they suggest, would be to build payments and benefits around the average of chronological and prospective ages.

As Baby Boomers, we'd like to start raking in benefits by 65 just as much as the next guy. On the other hand, we'd like there to be a social safety net when we need it. Social Security might conceivably survive in its current form, but Medicare is a goner. It seems like Sanderson and Scherbov have provided a rational and objective criteria for recalibrating social expections and salvaging our "old age" protections.

(Photo credit: Fluffiest Blog in the West.)