From time to time I will say something that my teenage son thinks is kind of cool. On those rare occasions, he will sometimes say with a slight chuckle, “old guys rock,” which is about as close to a compliment us old guys can expect from the teenage generation. Obviously “old” is a subjective concept. My wise father-in-law would often say, “old is twenty years older than you are.” Although I am older than I used to be, much of my thoughts and behavior “feel” younger than my actual age. I still play Ultimate Frisbee each weekend and still enjoy playing a video game now and then. Maybe a lot of this “old” thing is a learned behavior…
This week I had the privilege of hearing Dan Fuss, one of the most respected bond portfolio managers in the business, give a presentation to a group of professional investors. Dan, who by my father-in-law’s definition is “old” relative to me, started in the business in 1958 and probably has forgotten more about bonds and the markets than most people know. Dan’s comments are always entertaining, enlightening and useful. This time was no exception.
Market Watch featured a summary of his comments from a presentation in May of this year that does a pretty good job of highlighting Dan’s views. It is a worthy read: http://articles.marketwatch.com/2012-05-10/finance/31642652_1_interest-rates-unemployment-rate-loomis-sayles-bond-fund
Most economists and market strategists agree that the U.S. has a number of big problems – massive entitlement spending (which only grows as our population ages), government debt, an economy growing below potential, and so on. Most commentary from these experts is gloomy; they struggle to offer workable solutions that do not require draconian measures that seem highly unlikely (cutting Social Security payments, limiting access to health care, across the board government spending cuts, etc.). It’s easy to conclude that these troubles are chronic and insurmountable. This conclusion may be part of the reason for the miasma many people feel now about our nation.
Dan too is very clear-eyed about these problems and did not offer any quick and easy solutions. Yet, he did suggest something that I had never before considered that could help matters in a big way. It involves old people.
One key element to the prosperity our nation experienced in the late 1990s (no, it wasn’t tax increases…) was a dramatic increase in the percentage of the population in the workforce. Putting more people in the workforce has a tremendous impact on government revenue – much greater than raising taxes on any portion of the working population. Dan suggests that this could happen again in the U.S., and the demographic that could help out would be – wait for it – old people!
This is already happening in Japan. The effective retirement age in Japan has risen to 69 years (up from 60) over the last few decades. Dan told of his experience with a museum tour guide in Tokyo. This fellow had been retired for 15 years, and he decided to go back to work in his late 70s at the museum. It wasn’t because he had to work, but he wanted to. With medical and technological advances continuing at a rapid pace, it is easy to imagine a world where more “older” people will be able to perform many of the jobs that now are going unfilled. Our current effective retirement age is 67 (already above the “typical” retirement age), and it seems reasonable that this could rise over time.
Clearly this is not a sure thing and may not be any kind of panacea. Yet, most of the analysis I see about our nation’s big problems struggles to explain why tax revenues will rise (apart from increasing taxes, which is also rarely a sure thing). Dan has identified one possible way to see higher tax revenues.
In my view, there is a bit of irony here – the generation that is causing our structural entitlement/health care cost problems (the baby boomers) may ultimately become the solution to them. Until then be sure to get enough sleep, eat lots of fiber, exercise, take your vitamins and get ready for a more active retirement than you might have planned…