The Unintended Consequences of Longer Life Expectancies, Part One

Dr. Mike Roizen is Oprah’s personal physician. However, his achievements run much deeper than being an MD to the stars.

Dr. Roizen is an anesthesiologist and the chief wellness officer for the Cleveland Clinic (a $6 billion per annum medical business). He is a New York Times bestselling author and has served on advisory committees to the US Food and Drug Administration (FDA) for the past 16 years.

In short, Dr. Roizen is highly credentialed. In 2008 the Cincinnati Business Courier ran this headline:

Roizen: Lifespan could extend to age 160

Imagine that. Anyone under the age of 60 today could well be around to watch the two hundred year Fleet Review.

Here’s an extract from the article:

‘"I think there’s a real shot that within 15 years, it will be possible for us to conceive of a lifespan of 160," Dr. Michael Roizen, an expert on longevity, said in an interview this week.

Dr. Roizen made this bold prediction in 2008, so ‘within 15 years‘, is now down to a decade.

If Dr. Roizen is only partly correct and lifespans are increased to say age 110-120, the ramifications for the world are enormous.

Here are the some of the unintended consequences of life expectancies moving into the realm of the unthinkable:

    1. Marriage: ’till death do us part’ takes on a whole new meaning when you commit to a 100-year union. Thoughts like ‘do I really want to be with this person for the next 100 years?’ are bound to enter pre-nuptial deliberations.  When the tradition of marriage was introduced into society, the life expectancy range was 40 to 50 – a 20+ year commitment was not as daunting.
    2. Welfare: The Commonwealth age pension was introduced in 1910 for males over 65 and females over 60.

The following life expectancy chart from the Australian Institute of Health and Welfare shows most people had little prospect of claiming the age pension when it first commenced.

click to enlarge

Politicians in 1910 had no real inkling of the medical advancements that lay in wait over the next century.  These discoveries increased both the quality and quantity of our lives.

Today’s politician is far more aware of what possibly lies ahead in the field of medical science and the impact this is likely to have on society.

The plethora of entitlements bestowed upon demanding western constituents has to be pared back. Generations conditioned to taxpayers subsidising their lifestyle are unlikely to surrender these entitlements easily.

If life expectancies increase to 110 and beyond, age pensions are most certainly going to be in the sights of government. Incremental impediments to accessing an age pension should be factored into your plans. For instance:

  • Gradual increase in pension eligibility age
  • Harsher income and asset tests – possibly to include family home
  • Requirement to take out a reverse mortgage prior to accessing age pension
  • Capped indexation of benefits (irrespective of how high the CPI reading is)
  • Tax incentives to stay in the workforce until late 70’s / early 80’s.

The really big change I think is coming is the restriction of access to lump sum superannuation payments.

The present system of being able to access your super and spend sufficient to maximise your age pension eligibility is almost certain to end within the next decade. Plan to receive a pension from your super fund and possible access to a modest percentage of the capital.

Unless they want Social Security to become an even bigger Ponzi scheme, changes will need to be made to stop the pyramid inverting.

However you ‘slice and dice it’, the governments of tomorrow cannot honour the promises made by yesterday’s governments.

Plan for a greater level of self-sufficiency. If I am wrong, then having retained more of your capital as insurance is not such a dire outcome.

  • Healthcare: The danger with looking at healthcare in its current form and extrapolating it is the real risk of not factoring in game-changing medical innovations, drugs and treatments. At present governments are struggling under the weight of healthcare costs – in the US, healthcare is 18% of GDP and in Australia it is around 10%. Prevention and early detection are two areas that would greatly assist in reducing the strain on the health budget.

Perhaps an increase in life expectancy and a corresponding lift in quality of life would mean health costs actually plateau rather than continue to rise.

Better education on what causes certain diseases and ailments, together with significant advancements in detection technology can lead to healthier lifestyles, reducing society’s dependency on drugs and the scalpel.

This hoped for outcome is not going to happen overnight, so again planning for more of your household budget to be allocated to healthcare – Medicare gap; higher private health insurance premiums; access to more exclusive drugs – would be a prudent measure.

Also, what we don’t know is the unknown health issues our bodies have in store for us as we push the boundaries on life expectancies.

Science could cure cancer and then find that Mother Nature has another killer lying dormant to challenge our potential immortality. This has the potential to throw a spanner in the works. So err on the side of caution and plan for higher costs.

Stay tuned for more on this tomorrow.


Vern Gowdie+

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Vern Gowdie has been involved in financial planning since 1986. In 1999, Personal Investor magazine ranked Vern as one of Australia’s Top 50 financial planners. His previous firm, Gowdie Financial Planning was recognized in 2004, 2005, 2006 & 2007, by Independent Financial Adviser (IFA) magazine as one of the top five financial planning firms in Australia. He has been writing his 'Big Picture' column for regional newspapers since 2005 and has been a commentator on financial matters for Prime Radio talkback. His contrarian views often place him at odds with the financial planning profession. Vern is is Founder and Chairman of the Gowdie Family Wealth advisory service, a monthly newsletter with a clear aim: to help you build and protect wealth for future generations of your family. He is also editor of The Gowdie Letter, which aims to help you protect and grow your wealth during the great credit contraction. To have Vern’s enlightening market critique and commentary delivered straight to your inbox, take out a free subscription to Markets and Money here. Official websites and financial eletters Vern writes for:

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