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Comment by jo909 | Hacker News Reader

> The average life expectancy in 1950 was 68, meaning that a pension had to pay out only three years past the typical retirement age of 65. Today, average life expectancy is about 79, meaning that the same plan would have to pay out 13 years past typical retirement age.

That's the wrong statistic to use and completely wrong conclusion.

Life expectancy _for a 65 year old_ person in 1950 was another 13.9 years. That rose only to 19.1 years in 2010 (newest number I found at a glance).

All the babies and people dying before age 65 reduce the average life expectancy drastically, but have no bearing on pension payment length.

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All the people dying before 65 absolutely do have a bearing on pension payment length: If an employer promises someone a pension at 35 and they don't live long enough to collect then the employer doesn't have to fund that commitment. Using life expectancy at 65 would only be valid if the pensions were being promised only to those who had already lived to 65 and at the time they were 65.

Both are good points. It would probably be more accurate to use life expectancy at 25... so it starts around the time people start their careers, and it excludes all children deaths (who never contributed). If we did that, it's an increase from 71.5 to 80 (more than doubling retirement years, from 6.5 years to 15).

Source is here, starting on page 53, there's a nice table of life expectancy by age and date: https://www.cdc.gov/nchs/data/nvsr/nvsr65/nvsr65_08.pdf

This is totally an important factor for the pension provider, your are right about that. They will factor in how many people will never reach the payout age, the distribution of payout age, maybe if the spouse is covered too how long they might live, how may people switch their jobs and forfeit the pension etc.

I'd argue this has an impact on the "savings rate" per employee, but not on the average payout length.

> I'd argue this has an impact on the "savings rate" per employee, but not on the average payout length.

Your argument is only correct if we define the average payout length to only factor in those employees who receive at least one check. However the original quote that you claimed was wrong is referring how much the pension has to pay out on average, which is not limited to those who live long enough to collect a payout. Their average payout length of 3 years factors in a whole bunch of $0 payouts, whereas your average ignores all of the zeros.

I follow your argument, but I think that's certainly not what the author of the article was intending.

And that's a very hard number to come by, because as I've argued you would have to factor in all other reasons why a pension might have to be paid out longer or not at all.

Certainly "3 years of average payout" must be completely and utterly wrong because this number includes infants etc which were never employed. Infant and child mortality has an enormous impact on average life expectancy.

I don’t know about what the pensions from the 50s and 60s but modern pensions have dependency clauses. Based on that the majority of those pensions would pay out. If the pensioner dies their spouse will collect from retirement or 65. If they have no spouse but children the children can collect until 18.

The pensions I've seen give you the option of paying a lower amount for just you or a higher amount to cover you and your spouse if you die first.

I'm not sure it's quite as wrong as you say though. If the reason the life expectancy of a 65 year old is higher is that they are post-selected for not having died earlier, then it's the case that there were a bunch of people paying social security taxes that were dying before retirement. So there was more money for each one of those 13.9 years, because the people who survived were still able to use the cash put in by those that didn't. If you converted this into some figure that represented how many person-years of retirement the taxes from the average career supported, it would be closer to the three years, not the 13.9 years.

Life expectancy sadly is dropping at the moment.

http://www.bbc.com/news/world-us-canada-42452733

It's not a coincidence. The same .1% on 99% class warfare caused retirement age to be raised and life expectancy to be lowered.

The "pension affordability crisis" was patently never actually about pension affordability. If GDP goes up 400% since the 1960s while dependency ratios go up a mere ~15%, there's clearly something else going on.

That thing was a politically directed wealth transfer from poor to rich.

Early deaths help pension plans too, since those people will never draw from the plan. So, yes, average life expectancy is relevant here.

I think you're missing the point. Someone who dies at birth brings down the average life expectancy but does not affect pension funding at all. Read the other comments for more examples.

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