As some of us know far too well, forecasting the future with any precision is extremely difficult. There’s at least one exception to the rule, though. Population trends show themselves decades and even centuries in advance. If we know how many people were born in a given year, we can extrapolate what the population will look like far in the future.
On the other hand, demographic forecasting still requires assumptions. At what age will people start having children, and how many will they have? How will new medical advances affect life spans? When will people start working, stop working, and enter retirement? Small changes in any of those assumptions can quickly affect population numbers.
Today’s Outside the Box wrestles with that last question. In the United States we allowed the federal government to set 65 as the retirement age by making Social Security available to most workers at that point in their lives. The retirement age is going up to 67 for the younger members of the Baby Boom generation, but even that may be too “young” to retire in the future.
We Baby Boomers were never big on conformity. Voluntarily or not, a large number of us fully intend to stay in the workforce to age 70 and beyond. If 70 is the new 65, we will see significant changes in the ways people spend their money and the kinds of investments they want.
Matthew Tracey and Joachim Fels of PIMCO outline some of the possibilities in this report. I found it very interesting, and I think you will, too.
Speaking of things changing, the weather in Texas has been nothing like anything in the past. It is mid-February and I’m having to turn the air conditioner on at night. The forecasters tell us it’s going to get into the 80s on Friday. Talking with my long-term Texas friends, none of us can remember weather like this. Cooler than normal summers, milder than normal winters. I guess it’s a good thing it’s not like this every year, because then we’d have a wave of tax refugees showing up from California. Then again, this is Texas. If we wait a bit I’m sure we’ll get our usual ice storms and other nasty stuff. Winter is coming. Maybe.
I am struggling to keep up with the research my 20-some teams are developing for the chapters of The Age of Transformation. Thankfully I have a small team helping me review the research, which is on top of the research I’m doing for the five or so chapters that I’m personally writing. Plus, there’s my regular reading for doing the weekly letters and so forth. It is forcing me to sort through the pile of items in my inbox as to what is must-read, what can wait, and what I just don’t have time for. I really am learning to depend on people to make sure the things that I must read get on my radar screen.
I’m going to go ahead and hit the send button, as I have to prepare for an interview with CNBC Asia on Japan and related topics. You have a great week, and I hope that wherever you are, your weather is as good as ours.
Your marveling at the speed of things changing analyst,
John Mauldin, Editor
Outside the Box
70 Is the New 65: Demographics Still Support 'Lower Rates for Longer'
By Matthew Tracey and Joachim Fels
PIMCO.com, February, 2016
The so-called demographic cliff remains at least a decade away; meanwhile, global demographics should continue fueling the savings glut.
Is global aging about to end the savings glut? Some observers think so. More and more baby boomers are reaching retirement age, and they will soon not only save less but…