Getting old is something that all of us are heading towards, and something that is about to have an irreversible impact on the world. For the first time ever we’re about to see a world with more old people than young people in it and with children under the age of 5 being outnumbered by adults over the age of 65. We’ve also seen some incredible records being set, with Emma Morano, Elizabeth Gathoni Koinange, Nabi Tajima, Violet Brown and Chiyo Miyako all having reached their 117th birthdays.
While one Stanford researcher said that we shouldn’t start working full-time until we are forty, which would help redress the financial burden of paying people social security benefits and pensions and alleviate the stress of balancing a career and family at middle age, that isn’t currently a reality. As we wait for more innovative solutions to fall into place and societies around the world shift to later-age careers, flexible working, or de-retirement to bolster retirement funds, we need to have better short term plans in place. There are multiple issues surrounding our rapidly aging populations, not only related to healthcare; how will we house the elderly, keep them healthy and happy throughout old age, and how will our culture change its attitude towards the elderly as the population booms? We have an urgent need to redesign cities and take aging populations into account in city planning - can we ensure elderly people have access to diverse activities, easy access and affordable transport, and stay connected to the community through sustainable infrastructure? There are numerous studies on the topic and its something we need to take seriously and we should have started designing these cities decades ago. Ageing in cities, as the OECD looks into, is not going away.
The Boston Consulting Group’s report on Global Aging paints the picture: “Global aging will put significant pressure not only on corporate growth and productivity, but also on national pension, healthcare and welfare programs - as well as overall economic stability. The difficulties it will present are fundamental and far-reaching. Companies, governments and private individuals will therefore have to deal in a structural way with the new reality caused by a global population that is becoming increasingly skewed towards retirees and and senior citizens”. With more and more older people and millions of pensions to juggle, computing can play an important role in calculating financial risk and preparing our economies in the most robust way possible.
Monte Carlo Simulations are already being used to project and plan for economic outcomes by assessing the risk and uncertainty of individual, financial institution, and governmental portfolios. At a private level, they’re being used to test whether pension plans will provide enough money for people as they reach retirement age, whilst taking into account the evolving nature of their spending habits and lifestyle needs. While we are already using Monte Carlo simulations to conduct risk analysis of pension portfolios to a certain degree there are limitations: the results rely on how good the input data is and therefore who is actually employing the simulation. On top of that it is a fairly complex calculation and not always a 100% accurate risk-analysis of pension portfolios over individuals’ lifetimes.
But what if we could take one step further than the simulations we use to plan portfolio risk today, and model all of the individuals in a country, or even the world? This would allow us to accurately forecast and plan for the impactful economic scenarios that seem to appear out of nowhere, just like the 2008 housing crisis, which was predicted by very, very few.
We need to take retirement seriously and each generation should have the support, finances, and technology they need to be able to retire in a comfortable and safe manner. Planning for the most vast and sizeable older generation is a daunting task, but it’s one we need to quickly get to grips with. Using simulations to simulate reality as well as calculate various different economic scenarios, interest rates and withdrawal needs should be an integral part of looking to the future. It’s not only about determining the risk portfolios of our current generations, but identifying how to accurately predict and plan for the economic future of our kids.
Solving this problem could also help us to readdressing the inequality in wealth between generations in the future. The absence of robust planning is what has caused some of the most significant issues in the global economy over the past 50 years, and we need to make sure we’re far better equipped moving forward.
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