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Eighty Is The New Sixty

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Eighty is the New Sixty
Eighty Is The New Sixty. Or is it really?
Sylvain Dion
10/11/2014
​The aging of the Canadian population and workforce (physicians included) and its impact on financial security and planning.

​​Revolution or Evolution

​We are in the midst of a “revolution” which will potentially impact in a major way – among other things - our financial security, our quality of life and our prospects to age with dignity. It’s a quiet revolution, as it has crept up on us slowly every year over the last 50 years. We’re living longer and longer.

As physicians, you are in a unique position to observe and understand these changes as they have been the result of significant advances in medicine. Furthermore, the medical profession is being tasked with addressing the care of this ag​ing population. 

As citizens, you are also part of the aging population and you need to address your own needs, both on a personal level and for your family.

​The objective of this article is to talk about the aging of our population and workforce, and some of its ramifications.


 

The So-Called “Problem” and Its Issues

Living longer (and healthier) is a good thing and is the result of significant achievements and advances in medicine and nutrition, among other things. Nevertheless, there are some problems associated with an older and aging society.

The issues related to longer living are really the outcome of having been successful at resolving a number of significant challenges to our and our society’s well-being. An older society (and living longer) is not the problem per se: it is actually the outcome of our progress.

​The problem lies in our abilities to meet the challenges from living longer, including adaptation to new expectations and allocation of resources. Will the solutions of the past and current methods work in the future?


 

Background and Statistics

​Canada’s social, economic and ethno-cultural landscape has changed significantly over the past decades. Canada’s median age (i.e. the age at which half of the population is younger and half is older) has increased from 26 years old in 1971 to about 40 years old in 2011, and is projected to continue to increase to around 45 years old in 2036 – less than 25 years from now. The median age of our population has increased more than 50% over the last 40 years.

​The fastest growing age band is the group above age 65 which represented 8% of the population in 1971, and has grown to 15% at present. This segment is projected to increase to 23% of the total population in the next 2​0 years. Furthermore, within the 65-plus segment, the fastest growing group is the above-80 cohort, which made up less than 20% of the age 65-plus group thirty years ago, but is projected to represent around 40% of the age 65-plus group within the next 25-30 years.

These growth trends are the result of a number of different factors including:

      • Living Longer (Theory 1):  Life expectancy at birth has grown by more than 10 years over the last 50 years (from age 71 to 81). Unlike the improvements in life expectancy in the first half of the 20th century, which were mostly related to reductions in infant and child mortality, the major cause of this more recent increase is related to mortality improvements with the elderly (65 years old and over) and the older adults (45-64 age group). 
      • Living Longer (Theory 2):  In the last 50 years, life expectancy at age 65 has increased by six years (from an average of 15 years to 21 years, representing an increase of 40%) and is projected to further increase an additional two years by 2031. Many once fatal diseases such as heart disease have been conquered or are more under control, improving life expectancy.
      • ​Declining Fertility Rates:  Couples are having a smaller number of children, later in life: Canadian fertility rates have dropped more than 50% over the last fifty years (from an average of four children to less than two currently). As the growth rate of younger people has slowed, the proportional growth in older age bands has increased.


​"The per​centage of our population over age 85 will qua​druple from 1.5% in 2005 to almost 6% in ​​​​the next forty years."​


 

​​​The percentage of our population over age 65 was around 13% in 2005 (4.2 million people) and is projected to almost double in th​​e next twenty years to 25% (more than 9.8 million individuals). The percentage of our population over age 85 will quadruple from 1.5% in 2005 to almost 6% in the next forty years.

By 2026 it is predict​​ed that one out of three Canadians over the age of 65 (approx. 3 million people) will have developed a disability; a number which will exceed the number of those with a disability in the age 25-64 group. There will be more disabled Canadians over age 65 than under age 65.

These drastic changes in our population make-up from an age perspective are accompanied by other change​s as well:

  1. ​Major changes in family arrangements – more people live alone, are involved in non-traditional arrangements and/or marry and have children later in life. Ultimately, our society will include younger children and adults dealing with older parents.
  2. Drastic fluctuations in economic and financial cycles. The average yield on 10-year Canadian government bonds has gone down from an annual rate of 10% twenty years ago to its current level of 2-2.5% per year, having a significant impact on the ability of Canadians, particularly self-employed individuals such as most physicians, to accumulate enough financial resources to retire.

Implications

Clearly, retire​ment will be more expensive as a result of both living longer and the reduced interest rates. The investments requir​​ed to provide $1,000 of annual retirement income at age 65 now compared to 30 years ago have almost doubled.

One of the resulting impact​​​s will be for many Canadians to work longer, past the so-called normal retirement of age 65. This trend has already started: 

        • ​More than 50% of Canadians aged 60-64 are now in the workforce versus 30% in the mid-1990s
        • Within the OMA, a similar trend is being observed. In 2002, 4.9% of active physicians were over age 69; by 2022, it is estimated that this number will increase to 9%. In absolute numbers, the number of active physicians over age 69 in 2002 was 1,032; this is expected to grow to 2,861 by 2022 - a growth of 177%. To compare, the overall number of active physicians is estimated to grow from 21,056 in 2002 to just 31,789 in 2022, an increase of 51%
        • 25% of Canadians aged 65-69 today work compared to 10% in the mid-1990s.
        • The average ​retirement age is on the increase, having moved upward from the low 60’s back in 1997 to 63 currently. More than 65% of those approaching traditional retirement age intend to continue to work. Part of this trend may be unrelated to economic factors and more of a function of older productive, healthy people’s continued desire to make a contribution to society. Many aging workers actually enjoy their work and working in general

Current statistics indicate that on average, Canadians spend 90% of their total life (i.e. 73 years if the to​​tal life expectancy is 81 years) in good health and 10% in poor health or in a disability state (generally speaking, the last 7-8 years of their lives).The exposure to disabilities in the latter part of life is very high.  More than 73% of individuals aged 85 and over – versus 23% at age 55-64 – are expected to have a disability of some sort, usually involving the following:

        • ​​Loss of mobility and/or agility
        • Pain related limitations
        • Hearing and/or visual impairments
        • Memory loss
 

Such disabilities result in significant medical expenses. More than 45% of total health expenditures are curre​​ntly spent on the age 65 and over age cohort, which represents only 14% of the overall population.

The exposure to chronic diseases such as Alzheimer’s, dementia and other neurological diseases is multi​​plied as we get older. For example, Alzheimer’s is not often on the radar screen as a cause of death for individuals aged 65 and younger. However, it is a top five cause of death above age 80 and the ultimate outcome is likely preceded by 5-10 years of declining health. The exposure to chronic diseases involving memory loss, communication or learning issues is five times more at age 85 compared to age 65.

It is doubtful that our society is ready to deal qualitatively and quantitatively with this massive increase in the exposure to ch​​​ronic diseases. The fragmentation and smaller size of the family unit are such that the concept of “children taking care of their older parents” is not likely to survive for more than a generation.


 

Implications – For You as a Physician

 

The aging population, the changes in the family unit and a healthier, longer living population have significant implications for physicians. The new and increasing risk exposures – chronic diseases and disabilities after age 65 – will require a shift in healthcare resources and abilities over the next 20-40 years.

​On a personal level, physicians (and their families) are similarly impacted as the general population, including:

  1. Many physicians have to deal with their older, aging parents and use their financial resources to address aging issues.
  2. Compared to previous generations, more physicians with families are involved in a situation where both adults in the family work and have fewer children (one or two).
  3. Many aging physicians will have to deal with their own aging issues and are concerned that the family support and financial resources will not be there to address these issues.
 

Most financial planning addresses the protection of risks during the physicians’ working lifetime and for retirement purposes. How much life or disability insurance do I need to protect my family if something should occur in my active working lifetime? How much money do I need at retirement to maintain my standard of living?

This new approach to financial planning calls for a greater emphasis on yourself and your game plan to live longer, gracefully and to end life with dignity.


 

Bottom Line

 

The bottom line to our great “living longer” accomplishment is that at least three challenges will be there, with the third challenge being somewhat connected to the first two challenges.

First, we have already alluded to the “retirement income” challenge. It appears that this challenge is being met in part by changing attitudes toward retirement.

The second challenge relates to coverage and protection against the higher risks of chronic diseases related to living longer. This challenge is not currently addressed by group insurance, at least not in a sensible and economical way. Government programs will likely respond to this challenge but only to the extent that (and when) personal financial resources have been exhausted. In many cases, the family unit is unlikely to be there to address the issues.

The third challenge is the savings challenge. Canadians in general are not saving enough for retirement and certainly not enough for the challenges related to chronic diseases. Exposures to the risks of dying and becoming disabled during one’s working lifetime are still present, but in a much reduced way and should be recognized as catastrophic exposures. Living longer is creating a new beast: exposure to chronic diseases, which in turn requires more of a long-term planning exercise to address.

We have to change our paradigm and our way of thinking about aging. Dual working family units, living longer, increased exposure to chronic diseases, smaller or non-existent family units, working past age 65, etc., are dictating a new way. It is no longer only about buying life insurance to protect one’s family during one’s working lifetime and accumulating funds for retirement. It is much more about buying insurance for life both to protect our ability to be treated well in our older years and to secure an end of life with dignity. 

The time to engage in this new form of financial protection and to arrange this “insurance for life” is now, not at some point in the future when we start to face aging issues and the related healthcare implications.​

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Sylvain Dion is President and Chief Executive Officer of Dion Strategic Consulting Group. His fir​m specializes in strategic, insurance and actuarial consulting to professional associations. 

 
Sylvain has a Bachelor’s degree in Actuarial Science from Laval University. He is a Fellow of the Canadian Institute of Actuaries and the Society of Actuaries. He is also a member of the American Academy of Actuaries.

 

 
Sources
  1. July 17, 2014 OMA Board of Directors meeting, document 12.1A – Presentation 2015 Budget Timing Parameters SDC v3
  2. Canadian Institute of Actuaries – Issues Related to Increasing the Retirement Age – Task Force on Retirement Age, May 2013
  3. Canadian Institute For Health Information – Spending and Health Workforce – National Health Expenditure Trends 1975 to 2013
  4. Statistics Canada, Demography Division – Population Projections for Canada
  5. Bank of Canada, Data and Statistics Office
  6. Statistics Canada – Labour Force Surveys
  7. Conference Board of Canada – Life Expectancy Report Card
  8. OSFI – Mortality Projections of Public Pension Plans in Canada and its Financial Implications
  9. Older Canadians work in the Paid Labour Force – University of Alberta – Research on Aging – Zhaouen Mir, Jacquie Eales and Janet Fast (2013)
  10. Employment and Social Development Canada – Addressing the challenges and opportunities of ageing in Canada