Technology Day 2022: New Research on Aging and Longevity – Morning Session 2 Q&A
Whitney Espich: Hi, I'm Whitney Espich, the CEO of the MIT Alumni Association and I hope you enjoy this digital production created for alumni and friends like you. We already have a question about MIT versus Harvard longevity. So I can already tell, this is going in exactly the right direction. Jim, do you have any information about MIT versus Harvard longevity before we start in? I do not. OK.
[LAUGHTER] But next year you could work on the-- We'll work in it. --dataset for that. Yes.
I just want to ask both of you kind of like a real sort of not technical but gut-level question. Jim, I know you think a lot about retirement and the American public as a whole. And I wonder how worried are when you look at the numbers, how much people save? And then obviously we know that the population is aging rapidly.
That's where a ton of people are-- just on a personal level. On balance, I'm an optimist. OK.
I think that there are clearly a set of issues around people who have not been well covered by retirement plans, particularly as we've moved into the defined contribution world. That particularly its smaller firms. Lower-wage workers may not have the coverage that they might have had back in the day, in the halcyon days of defined benefit plans. But I think that this is a case in which the history somehow looks rosier in the rearview mirror, that even when we had the world of traditional pensions, there were lots of people who didn't have coverage in pension plans. Some folks here may remember the problem of vesting in pension plans. People would leave jobs.
They wouldn't get any pension benefits as a result. It wasn't all as rosy as it might seem. So while there are some issues, and surely some folks who are falling through the cracks, I think that on balance, the combination of being much healthier as we get to these advanced ages, the fact that we do have a security system, a Social Security system, which provides a safety net.
And we could have an interesting discussion about whether we should do more, especially at the bottom. But those are tweaks. Those are not we're falling into a chasm.
So I think that despite the fact that there are many claims in the media about we have a looming retirement crisis. I think we have groups that fall into gaps in the retirement system. I don't think it's of a crisis proportion. Just a quick followup-- I wonder what you think of people's ability, because without a defined benefit plan, people are thinking about risk all the time.
And I'll just use an anecdote from my own life. My husband, who's an MIT alum but fortunately is not here today in this audience, his mother calls him every time the stock market makes a big move. And I've said, I think we should sell her as like a perfect contra indicator because every time it goes down, she's like, I think I should sell everything that I have. Do you think I should? And he has to talk her out of it. But I wonder about her as a kind of proxy for-- right-- and every time the market goes up, it seems like a good investment.
I mean, she's not Warren Buffett is what I'm telling you. Few of us are, right? But I think the evidence we have, particularly around retirement plans, and some of the big financial institutions publish some data on turnover trading within their retirement accounts, it's pretty limited. I mean, even when we went through, say, the beginning of 2020, the very dramatic market drop at the onset of the pandemic. Most people seem to have just ridden through the storm. So I'm sure there are our folks who are pushed to do something. But I think the happy news may be that many of those who are inclined to sell low and buy high have folks like you and your husband to pull them back from the ledge and keep them in there.
Yeah. And then, Joe, a question for you-- same kind of how worried are you? We were talking about this before. If you have a population where people are having fewer and fewer children, which pretty much they have been every year for the last few decades, and we don't have a-- this is not a time of a big influx of immigrants, and it hasn't been for at least several years. Do you worry about this inverted pyramid that we're walking into.
Obviously, like Japan has been there and everything. But do you worry about that? I guess I'm going to fall into Jim's category. I'm optimistic.
And I'm only worried if we don't change the story of old age. And what I mean by that-- and Jim had a great bullet on there about working longer, and I heard a lot of groans out there. But the fact of the matter is that we have a social system and an understanding of retirement that was built around 1930 and early 1960s thinking, for a world that's living far longer, with new technology and the like. And many of us, I don't know about you, but I get paid to run off at the mouth and drive a keyboard. Retirement was made for people who actually work for a living, lifting bricks, driving trucks, building buildings. No, I'm optimistic, if we start to change the story.
A question from the audience-- we have entrepreneurship, like do it all yourself, and Uber, which they-- drivers do nothing but drive. What excites you about prospects for work for older people that are in between maybe those two extremes? I think what excites me there is that we're starting this-- and COVID actually helped, believe it or not. The pandemic served as a propellant, making employers far more flexible.
And that's what essentially younger people have been wanting, flexibility in the workplace. But now older people are looking for that as well. So you may not see the early retirement. You may see the step-down retirement. You may see the consulting back. Now, grant you, that's a select group of us that can do that.
But I'm optimistic that that's going to take a lot of, shall we say, burden off of retirement spending later on. And I think, by the way, that is something. In surveys, one of the first preferences, when you look at-- ask folks who are retired, would you be willing to return to a job like the one you had, and what would it take to induce you to do that? Flexibility is actually at the top of the list.
And the pandemic has probably given us the tools to implement flexibility in the workplace on a much broader scale, which makes me think that the possibility of doing some work for some period of time. And in the pure economic sense, it's kind of delaying the point at which you start to draw down the assets you've built up. And that doesn't mean you have to be saving a lot.
But if you're just able to do part-time work, three days a week or something like that and pushes out that horizon, that can be a really important step. There is a question, what would the life expectancy disparity look like for Scandinavia? But I'm just going to broaden that out and ask-- I feel like what they're getting at is, is the US particularly-- do we have particularly large disparities in life between the top and the bottom. Are there countries, whether it's Japan or countries in Europe, where things are closer together, it's more even.
I'll start. But I want to bring Joe in as well. I mean, the US has more heterogeneity than many countries do. And in part that is a function of we have more income inequality in the US than a number of, say, the Scandinavian and other countries in Europe we don't rely as much on the public sector to provide egalitarian healthcare availability, not just in retirement, which is Medicare in the US, but throughout the life course. And we have a population-- the lower income part of the US population lives in a more precarious existence than in many of these countries. So if you simply look at the life expectancy across countries, which is the aggregate for everybody, you find out the US is not at the top of the league table.
But there's a subpopulation within the US, and it comes from this higher income, higher educated part, where the life expectancy compares very favorably with the rest of the world. And I've asked medical friends, if you had to pick a country in which to consume the medical care that you had a condition, where would you choose to go? Would you go to one of these countries with the higher life expectancies? And the answer is always come back, no, I'd do it in the US. But that's a statement about the access to medical care and being able to consume the medical care and some of our top-tier institutions. No.
And I agree with Jim. While Sweden may have Stockholm, we have Louisiana. I mean the mixture of, shall we say, of disparity in health and access to good food and the like is great.
One of the things before we celebrate certain countries, always look under the hood a little bit. So let's talk about Northern Europe. 52% of the people over age 75 in northern Europe live by themselves-- households of one. And by the way, regardless of age-- Oslo, Paris, Brussels-- more houses there are households of one than households of two or more.
So they may be living longer, but they're living alone. There's a question. If we live to 100, how do we prevent being the Walking Dead, as my brain goes before my body? But I just wonder what you see in terms of what works. I know there's been studies for a long time, looking at people who live a really long time, over 90, over 100, and what they do and what works. What do we know? This morning I thought was great. I think that we should-- I mean that's classic MIT, with technology and behavior and the like coming together.
So I'm excited about the technology and the services the medications and treatments that will keep us living longer and better. But the other thing that we've learned from centenarians and even our 85-plus panel in the AgeLab. Be active.
Don't take up the story of retirement, meaning sit on the couch and watch TV. Do you know, the average American over 65 spent six to seven hours a day watching TV? That's not living longer better. That's just a waiting room. You know, you and I talked, probably 10 years ago or something, about some of the stuff you talked about here, which is that big business thinks about older people as, even though they have a tremendous amount of buying power, as not very important and kind of something to be ignored.
Has that changed? Do you do you see movement there? Or are we kind of where we were a decade ago. Seeing movement, but it's ever so painfully slow. I mean, do you know the millennials, the kids that are in their late 20s to about age 40 now. They've already been passed by. We're now looking at Gen Z, the teens and the early 20s, in terms of how marketers think.
But they seem to believe that if we can capture you between 18 and roughly 25 or thereabouts, you will not change any behaviors. I don't know about you. I grew up in a house where General Motors was the answer, now what's your question? [LAUGHTER] My parents, when they left this planet, we're driving a Toyota.
People do change, but business, apparently, is slow. Jim, this should be an easy question for you. What will be the impact of change in age distribution, fewer young people, on long-term investment returns and the funds available to support retirement? This is a small-- It's not an easy question, but I'll take a stab. One thing we have some evidence on is that, as folks age, they tend to become somewhat more risk-averse investors. They tend to have a greater demand for safer investments relative to high risk type things. And this is where we loop back to some of the conversation earlier this morning.
As the whole population ages, as opposed to a single individual aging, if you've got lots more people who are demanding relatively safe investment, that's going to change what the capital market will offer up, right? It's going to raise the cost in some sense to someone who's trying to start a high risk entrepreneurial venture. It's going to lower the cost relatively for someone who's opening a business that seems like it's a relatively safe bet to go with. And it's going to shift what we call the risk premium that's going to exist in the capital market by saying people will need to be paid more to take the risks. So the market will deliver more of those risk less assets.
And it'll be more difficult to do risky ventures in that world. That has consequences for what the economy will look like because you might see a diminution of dynamism. Another aspect of this, by the way, and it picks off something that Joe was mentioning about the high entrepreneurship groups. There's also this debate about whether you lose entrepreneurial vigor if you see an aging population. And one of the key challenges I think is to recognize that you may be able to harness this tremendously talented pool that is approaching what would be traditional retirement ages, but may have a-- one thing that helps entrepreneurs is if they think they're working with a net below them.
And if you think you've actually got a reasonably secure nest egg for retirement, but you can think about some new out-of-the-box ideas, that can actually produce some interesting entrepreneurial activity. There are a bunch of questions about healthcare. And I want to-- Jon Gruber, who's an economist here, has talked about how, in 1960, about 5%, I think, of our GDP went to healthcare. It's closing in on 20%. Presumably it's not going to take over everything, and we're not going to just spend everything on healthcare. But I wonder how both of you think about that in relationship to aging, the increasing cost of healthcare, where that puts us, how people should think about that as they and what, if anything, concerns you about that as we move in that direction as a country.
I'm looking to the fact that technology that's coming out today and the services behind them are more about proactive health rather than reactive. And what I mean by that is, I want you to imagine your home underneath your carpet having sensors that show, gee, Joe's gait has begun to change. He's likely to fall.
I don't want a technology that says, "Joe's fallen, and he can't get up" because once I'm down, 50% of us will not be up in nine months. That's going to be a healthcare cost. So I think it's about getting ahead of the system rather than how do we pay for conditions once they've happened. And I do believe we're headed that direction, not fast enough, but we're getting there. Yeah. And just to jump in on your-- the striking growth of healthcare expenditures in the US is something which attracts enormous attention within economics.
But I just ask you to run the following little thought experiment. Imagine I said, you can go back. We've got a time machine. Joe and his team have a time machine that they've invented, and you can have 1960 healthcare and pay the 1960 prices. It's just your call.
You want to get your knee replaced? How long are you going to be unable to move around? What's the difference in the quality of the lifestyle you're going to have after that, or a hip replacement. And I mean, when you just look at the things which are now done on an outpatient basis, and people are actually moving around quickly and the time it takes to be treated. I mean, there are remarkable changes in what's happened. Now, we are spending a lot more.
And there's no doubt that the incentives are greater for doing acute treatment and then treating people who need the product forever as opposed to doing ex-ante, improve a lifestyle, keep people out of the hospital and do precautionary things. But it's very complicated to know that we are spending too much, because the valuation is really a challenge. What is clear is that there's a lot of inefficiency in the system. We can surely manage to do what we do better. But as my colleague, Jon Gruber is one of our economists who works on this.
Amy Finkelstein, my colleague, is another. And the problem is we may spend 50% too much on healthcare for people who are in adverse circumstances. The problem is, we just can't tell which 50% is misspent. So it's really hard to decide exactly how you try to rein this in. And I guess I would look at that more as a political question than an economic question because when you say "too much," that's a value statement, that you want to spend the money on something else.
When you talked about how most people want to stay in their homes, and they don't want to go to nursing homes or necessarily assisted living facilities. And you see we don't have that many immigrants coming in, and we don't have that many young people being born. I wonder how you think about how those people in their homes, many of whom now get some kind of help from some other person who's younger than themselves, who are going to be those people if you have a ton of people who are older and not that many people who are younger? There's certainly going to be a burgeoning, explosive business in care services, given the dearth of children. We call it demographic winter out there. And it's not just about immigrants as well.
It's about the specialized care that many people will need. But just so you know, fewer than 9% of the population ever saw anything to do with senior housing. So it's not like a manifest destiny, if you will, that's out there. And I do think that we learned during the pandemic that smart uses of technology, services that now have become commonplace, we did a back of an envelope study that if I can keep you in your home six months longer than going into an independent or assisted living, that's a $22 billion ding to the senior housing industry. So we're finding ways to push you or keep you home, if that's where you want to be. And by the way, I mean, this is an area where the issues are not just around lifestyle, but they're also around cascading effects on children I mean, one of the things that's attracting attention in labor market analysis these days is the effect of the older old this is 85 to 95-year-old parent who now needs care leading to the dropping out of the labor force for a 60 to 65-year-old child, who basically is concluding that it's difficult to find quite the configuration of care that's needed.
And consequently, early retirement for that person becomes an active thing. So this kind flows down through the age distribution. And I think developing the institutional structures which can better scaffold that is certainly an important thing going forward. And there's a strong tone of gender in there. The second person that gives care after a spouse is typically the oldest adult daughter. We have 10-- two girls 10 years apart.
When one gets tired, the other one comes online. [LAUGHS] Well planned. Yeah, [? I think so. ?]
I'm going to just give you this question from the audience. Jim, they say you should retire rich and die poor. Do you do you think that way? Which, of course, involves probably knowing exactly when you're going to die, but that's a different question. 20 years ago, I was at a conference with some financial planners.
And I was giving a talk on something having to do with retirement saving. And one of the speakers before me started with a-- he said, you know, the definition of good retirement planning is that you run out of money. And then the afternoon when you run out of money, that's the afternoon you die.
The definition of great retirement planning is you die and then the next day the checks start bouncing. [LAUGHTER] But uncertainty about longevity is a very important challenge from the standpoint of retirement security. And part of the reason I was so excited the Alumni Association was prepared to do the calculations I shared with you was, I mean, for a group like this, on average, while there's lots of uncertainty, but this is a group that is likely to live longer than the national average by a significant margin. That doesn't mean for any individual we have much guidelines. The other thing that is relevant though, is that it is-- we believe it's much easier to know at this point that for someone who's got an acute condition or something which looks like a terminal diagnosis, it's easier to know that you might have a short life expectancy than to know with high confidence that you have a long life expectancy.
So if I asked you to try to predict, might you live to be 100. 7% of the men who were born in 1922 and attended MIT and graduated lived to 100. At least we think, based on the data.
But would you-- at age 65, how well would you have done it making that prediction? Well, if you've got four grandparents who live to be 110, you might say, yeah, I'll check that box. I think I've got a pretty good shot. But for most of us, that's not something which is easy to forecast.
So this features into the nature of the uncertainties that we face. And I don't think we've quite figured out yet how to put that into our thinking about retirement planning. I'm going to give you the final question, Joe, which is, you made the joke about Cambridge and Central Square being the lab for all the-- I don't know-- urban design projects that were good, bad, whatever. How much do you feel like the way that people live, some of these multigenerational communities, like that things are actually changing in terms of creative ways for older people to live? Or is it pretty much people just like living in their single-family homes, where they lived their lives? I am very optimistic.
We're seeing, shall we say, I call them longevity hubs, hubs of innovation that are really starting on the edge to change how we think of 100-year life, changing where we live, how we get around, rethinking the nature of work and the like. So, yeah, Central Square, everything from trucks to traffic calming, to everything else going in there, look at it is a living experiment. But things are getting better.
Joe and Jim, thank you so much. Thanks to you for your questions. [APPLAUSE] Whitney Espich: Thanks for joining us and for more information on how to connect with the MIT Alumni Association please visit our website.
2022-06-25 05:33
