$54,000
$15,970

Longevity Risk

A look at why, in this age of biotechnology and great uncertainty over the degree to which life spans will be extended in the next few decades, it is unwise to trust your financial future to large pension and welfare institutions. Any significant progress over the present very modest baseline of incidental life extension through general advances in medicine will likely bring down much of the existing system in the years ahead - which of course suggests that big centralized pension systems should be avoided like the plague, but that won't happen. If today's politics are any guide, politicians will continue to aggressively devalue their national currencies, taking wealth from their broader population to pay for what cannot be afforded until such time as the house of cards cannot be propped up any longer. The lesson to be taken away here: expect to provide for your own financial security in later life, and act accordingly now: "Here's the issue: governments have done their analysis of the aging issue largely based on best guesses of population developments in the future. These developments include further drops in fertility and some further increase in longevity. The trouble is that in the past, longevity has been consistently and substantially underestimated. We all live much longer now than had been expected 30, 20, and even just 10 years ago. So there is a good chance in the future people will live longer than we expect now. We call this longevity risk - the risk we all live longer than anticipated. ... Why is that a risk, you may ask. We all like to live longer, healthy lives. Sure, but let's now return to those pension worries. If you retire at 65 and plan your retirement finances expecting to live another 20 years (assuming you have enough savings for at least that period), you would face a serious personal financial crisis if you actually live to 95, or - well in your 100s. You could rely on your social security system at that point, but the program is also counting on people not living much beyond their mid-80s in most countries. Your personal financial problem multiplies by the size of the population, and, for society as a whole, becomes a very large problem." An example of how the present politics and systems of wealth transfer reward irresponsibility at all levels until such time as growth in collective irresponsibility sinks the whole venture.

Link: http://www.huffingtonpost.com/erik-oppers/seven-billion-reasons-to-_b_1417749.html

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