Jane the Actuary Retirement

Forbes post, “A Tale Of Two Multi-Employer Plan (Systems)”

Originally published at Forbes.com on November 27, 2018.

 

Readers, I have been remiss.  Taft-Hartley multi-employer pension plans and the deeply-in-the-red PBGC guaranty fund which is meant to cover them but cannot because of their financial trouble, are an important part of the overall landscape of pension plans in America, and I am long overdue in giving the lay of the land in terms of the trouble they’re in.  But we’re fast approaching a key deadline, as a special congressional committee is due to report on its recommendations on November 30; as reported by the Washington Post, their proposal includes $3 billion in benefit subsidies along with benefit cuts and increased contribution requirements by participating employers.

The $3 billion is, of course, a drop in the bucket considering the fund’s deficit of $53 billion, and its projected insolvency in 2025, according to the most recent actuarial report — financial troubles which are not shared equally by all such multi-employer plans but by a small percentage of the total which are “red zone” and “deep red zone” plans, which make up 17.1% and 6.6% of all such plans; in general, these “red zone” plans are ones in declining industries or industries in which the share of the workforce that’s unionized is declining, most notably mining and transportation.

So let’s back up:  what are multi-employer plans?  These are union-sponsored plans.  In principle, they’re actually a great concept:  because for certain occupations, a worker will be employed with a number of different employers over his or her lifetime, but stay with the same union, they enable that worker to accrue benefits in a stable way rather than worrying about vesting or about the backloading I discussed in a recent article.  Each employer negotiates a contribution rate with the union and then workers accrue retirement benefits based on those negotiated benefits, which may vary based on the specific contract the union has with a given employer, but still allow workers to reliably accrue benefits even while switching employers.

Essentially, these plans, called Taft-Hartley after the legislation which first formalized their structure in 1947, are the American version of a type of union-managed pension plan common in other countries.  For instance, in the Netherlands, there are plans called “Collective Defined Contribution” plans in which employers are able to avoid the risks inherent in offering traditional pensions, but workers still receive benefits which look very much like traditional pension benefits.  (See this profile at the U.S.-based Pension Rights Center.)  And large industries have their own “industry pension funds” to which employers contribute as part of their collective bargaining agreements.

As it happens, at pretty much exactly the same time as the Post was reporting on U.S. multiemployer plans, a trade publication on international pensions reported on these Dutch industry funds, with the headline “Dutch metal industry schemes inch closer to benefit cuts.”

But this is not what it seems, some sort of proof that these plans are troubled in some global fashion.

Instead, they offer a dramatic contrast to US plans.

These Dutch plans are required to cut benefits if they are deemed insufficiently funded for five years in a row.

The required minimum funding percentage?  104.3%.

The required interest rate?  1.5%.

The ratio at which the particular plans in question are actually funded?  101%.

Yes, you’re reading those numbers correctly.

And here’s the contrast with American multiemployer plans:

Unlike the mandatory overfunding in Dutch plans, until 2006, American plans were actually prohibited from building up overfunding as reserves against future market downturns or other unfavorable experience.

The full scope of the explanation for the multi-employer system’s woes is complex and deserving of multiple articles (though the impatient can read the report prepared by the Center for Retirement Research).  But here’s a brief explanation of one piece of the puzzle:

You are likely aware that the government requires that employers make contributions to the pension plans they sponsor.  Beginning with the Employees’ Retirement Income Security Act of 1974 (ERISA), Congress has passed various laws intended to protect pension plan participants (and the PBGC) from the consequences of companies being unable to pay out benefits.  But at the same time, because employers’ contributions to pension funds are tax-deductible, Congress has limited the degree to which companies can contribute to their pension funds, with an excise tax applied if a plan contributes more than legally permitted.

This is what that meant for multi-employer plans (the rules are somewhat different for single-employer plans):

From 1974 until 1994, based on the original ERISA provisions, employers could not make any additional contributions to a plan once it was deemed 100% funded, using a valuation interest rate based on the plan’s asset return assumption.  This was called the Full Funding Limitation.

From 1994 to 2006, based on a new law, the Retirement Protection Act, plans could  use an alternative measure and fund up to 90% of the “current liability,” if greater, an amount which might or might not be higher than the original funding maximum, because (among other differences) it used a long-term government bond rate instead of the plan’s funding rate.

Only beginning in 2006, with the Pension Protection Act, were plans finally permitted to fund up to 140% of the “current liability” funding level.

What’s more, for some plans, not only were plans prevented from building up a level of overfunding that would have protected them in downturns, but the nature of the union contracts that were the basis of these plans meant that the employers continued making contributions on behalf of their employees.  In order to avoid violating the maximum funding rules during boom times when assets were doing well, plans had to make themselves less-well funded.  Some plans gave one-time benefit boosts; others unwittingly created the conditions for a deeper hole in the future by increasing benefits overall.

Would those plans have built up such a reserve, had they had the option?  That’s another question.

But pension funding legislation essentially presumed that pension plans would always be around; even if individual plans might fail, the overall universe of pension plan sponsors would always be there able to absorb the losses of a reasonable percentage of companies.  The legislation itself did not foresee pension plans becoming a legacy cost without future generations contributing to offset periodic losses.

Which means that, to a real degree, however unpleasant it may be to contemplate a bailout, Congress owns this problem.

 

December 2024 Author’s note: the terms of my affiliation with Forbes enable me to republish materials on other sites, so I am updating my personal website by duplicating a selected portion of my Forbes writing here.

Jane the Actuary Retirement

Forbes post, “A ‘Simple Fix’ To Solve Public Pension Funding Woes? Think Again.”

Originally published at Forbes.com on November 9, 2018.

 

Readers, I have previously lamented that the incoming governor in the state of Illinois, JB Pritzker, has no plan with respect to the state’s woeful pension underfunding, which, as a reminder, totals $130 billion over the five pension plans for which the state has responsibility, not to mention the debt of the various municipalities, most notably the city of Chicago, for their own plans.  Note, too, that this $130 billion underfunding only includes Illinois’ obligation for accruals for past service, but without a change to the state’s constitution, we’re on the hook for pension accruals for all future service for existing employees.  What’s more, this underfunding is based on valuation interest rates of about 7% (it varies by plan from 6.75% to 7.25%), set based on the plan’s management’s determination of future investment returns; if the plan was required to use a bond rate to measure its liabilities like a private-sector plan, the liabilities would be significantly higher.

As it happens, though, he, and the Illinois Democrats in general, think they does have a plan.  Here’s the plan as spelled out by the newly-elected State Senator for my own district, Ann Gillespie, as described on her website:

Ann endorses a simple fix to fund the pension liability by amortizing the liability over a fifty year period at a set rate. This is like refinancing your mortgage to achieve a lower rate. While slightly more costly at first, it would save the state millions of dollars in the long run.

It turns out that this is a poorly-explained version of the proposal of the Chicago-based Center for Tax and Budget Accountability:

Illinois’ five state pension systems face a debt crisis after years of intentional borrowing from state contributions. The crisis is compounded by a backloaded repayment plan that calls for unrealistic, unsustainable state contributions in future years, putting funding for crucial public services at risk. Because the crisis is about debt, rather than benefits being earned by current and future employees, attempts to solve the problem through benefit cuts have failed. CTBA proposes resolving the pension debt crisis by reamortizing our payment schedule, creating a sustainable, level-dollar plan that saves the state $67 billion and gets the pension systems 70 percent funded by 2045. To bridge the higher contributions called for in the first several years of the reamortization plan, CTBA suggests using bonds to ensure current services do not have to be cut.

Where do I start?

To begin with, this is not a “simple fix.”  The CTBA fairly criticizes the existing amortization plan, the so-called “Edgar Ramp,” which indeed backloaded the pension contributions, and which, alongside the contribution holidays of subsequent governors, contributed significantly to the current underfunding.  But its proposal’s “reamortization” is nothing more than a further plan to keep the plan underfunded for longer.  In fact, its plan is to achieve 70% rather than 90% funding by 2045, and it has no intention of achieving a higher funded ratio, except (near as I can tell) to the extent that asset growth is more favorable than projected.  The only other element of “cost savings” is to issue more pension obligation bonds, to the tune of $11.2 billion, money which is meant to provide additional funding into the pension funds beyond the current contribution schedule, for the early years of the plan.  This is, again, the dream of “easy money” because of the hope for gains from investment returns higher than the interest paid out to bondholders.

There is no money “being saved” in this proposal.  There is no “lower interest rate” as in a mortgage refinance.  Pension obligations consist of payments owed to current and future retirees next year, and the year after, and the year after that, and far into the future — obligations which should have been advance-funded by paying into the relevant pension funds the amounts needed to fund those benefits, year-by-year, as those benefits were accrued.  Every year that the state failed to do this (and every time in which they increased benefits without funding them), is a year in which legislators placed obligations on future generations, no differently than if they’d issued bonds to pay salaries of teachers and state employees.  Choosing now to continue to defer a significant portion of this debt into further into the future is not “saving money” — it’s passing that debt onto your children and grandchildren.  And it goes without saying that leaving pensions partially or wholly unfunded passes past and current compensation costs onto those same children and grandchildren to an even greater degree — see my original “actuary-splainer” on the subject.

And, contrary to the assertions of the CTBA, this crisis is about both debt and benefits.  Up until the “Tier II” reform of 2011, Illinois had long had a practice of increasing pension benefits for short-term budget gains or to reward employees in union contract talks, and the benefits accrued by “Tier I” employees, especially given their generous retirement-age and COLA provisions, are significantly richer than the combination of Social Security and a typical private-sector retirement plan provision.

So the only question that remains, as far as I’m concerned, is this:  do Gillespie and Pritzker and the rest of the lot not understand this, or are they simply hoping that Illinoisians won’t question their explanations?

UPDATE:

Crain’s this morning reported on an interview with Pritzker which confirmed that he is “looking seriously” at the CTBA proposal, in particular, the plan to issue Pension Obligation Bonds, and that CTBA chief Ralph Martire is a part of his “transition financial team.”

 

December 2024 Author’s note: the terms of my affiliation with Forbes enable me to republish materials on other sites, so I am updating my personal website by duplicating a selected portion of my Forbes writing here.

Jane the Actuary Retirement

Forbes post, “Will Fertility Rebound? New Study Says Yes”

Originally published at Forbes.com on November 8, 2018.  Quite honestly, I’m rather skeptical about this theory, but it merits considering.

 

The conventional wisdom is this:  just as birthrates have plunged in places like Europe, so, too, will they drop to replacement level in Africa, and, in any country in which fertility rates have dropped, it’ll be necessary to offer financial inducements like parental leave benefits and child benefits to bring birthrates up, as well as increase immigration levels as needed.

A new study suggests that this conventional wisdom is wrong, and that birthrates will rise again, for a surprising (or perhaps not-so-surprising) reason: evolution.  The article’s title is self-explanatory:  “The heritability of fertility makes world population stabilization unlikely in the foreseeable future.”  It was published in the journal Evolution & Human Behavior, but a summary of the argument is available at the Institute for Family Studies blog, and one of the two authors, Jason Collins, also provides some data in his own blogpost (he co-wrote with Lionel Page).

The core idea is this:

As long as a society has no practical means of controlling its fertility, fertility itself is not particularly heritable.  Yes, at the margins, couples who are marginally fertile will have fewer kids than those who do not have any such issues, but this isn’t going to make a significant difference in fertility rates over time.

However, as soon as individuals exercise choice over how many children they wish to have, then fertility does become heritable; that is, some constellation of traits that affect how many children one chooses to have are genetic as opposed to simply the product of the environment.  This might be as simple as a genetic predisposition to “liking children” or a disposition towards being religious, or might be a personality that is better able to cope with the chaos of a large family or regimented enough to reduce the chaos, or less anxious about financial strain or less keen on world travel.  It might be a genetic predisposition towards finding Mr./Ms. Right early rather than waiting until age 30 or later.

The paper is actually agnostic on what the specific mechanism for the heritability of fertility might be, just that the math checks out, based on the types of calculations that researchers use to identify the degree to which some characteristic or another is heritable.  And based on these mathematical models, they determine that once, in any particular region, fertility is low enough that individual choices begin to make a significant difference in family size, fertility rates will begin to rebound, because the parents who are predisposed to having above-average numbers of kids will pass on those traits.  They calculate that the world fertility rate, which now stands at 2.52 (as of the period 2010 – 2015) and is forecast to drop to 1.83 in 2095 – 2100 in the baseline UN forecast, will, in fact, continue to drop, but eventually, as this evolutionary impact comes into play, birth rates will rebound to slightly above replacement level, at 2.21.  At a regional level, European fertility rate is forecast to reach 2.46 instead of 1.83, and North American fertility, 2.67 rather than 1.85.

To be sure, inherent desires for a given number of children and ability, or lack thereof, to control one’s fertility, are not the only factors influencing a country’s fertility rate.  Just as important in determining a country’s fertility rate are economic conditions and norms within the broader culture — whether a baby boom in which women without deeply maternal desires feel pressure to have children or, in current conditions, when women are outsiders, and possibly even shamed, for having an above average number of children.  But Collins’ and Page’s premise is that, even within a given set of economic and cultural circumstances that produces generally low fertility, genetically-influenced differences in personality will, to at least some extent, produce long-term fertility increases.

Ultimately, neither laypeople nor scholars can know the future with any certainty.  It’s easy to find predictions of a Star Trek-like utopia in which no one needs to work but merely does so for reasons of personal fulfillment, or predictions of a dystopia in which the rich oppress the poor, who live in squalor.   While this analysis doesn’t prove anything one way or the other, it’s a very interesting piece of the puzzle.

 

December 2024 Author’s note: the terms of my affiliation with Forbes enable me to republish materials on other sites, so I am updating my personal website by duplicating a selected portion of my Forbes writing here.

Jane the Actuary Retirement

Forbes post, “Yes, Social Security Is An ‘Entitlement'”

Originally published at Forbes.com on November 5, 2018.

 

No doubt you’ve heard this before, on your Twitter or Facebook, or among your friends:

“Social Security isn’t an entitlement, it’s an earned benefit!”

See, for example, this The Hill opinion piece from late October, the title of which contains the entire thesis:  “Treat Social Security the way President Roosevelt intended, as an insurance program not an entitlement.”  The author, Rep. John B. Larson (D-Conn.), laments that “Republicans have tried to privatize [Social Security and Medicare and] label it as a welfare or entitlement program.”  And as of this writing, a Google search pulls up numerous recent instances of recent letters-to-the-editor, such as this one at the East Oregonian (“The GOP leadership has started referring to Social Security and Medicare as “entitlements” . . . but . . . these are benefits we have earned and paid for with deductions from our paychecks . . . . They are not gifts.”), the Dayton Observer (“It’s their money, not a gift or entitlement from the government.”), and another at the Lynchberg News & Advance, (“Social Security is not entitlement programs [sic] (nor is Medicare); rather that it is a program that folks have paid into all their working lives.”).

Of course, that’s all a bit silly.

An “entitlement,” as a type of federal spending, is a government program in which recipients automatically receive benefits that they’re eligible for based on the applicable legislation.  Social Security is an entitlement because everyone who meets the eligibility criteria (40 “quarters” of eligible earnings) is entitled to a benefit.  No one is dependent on Congress to appropriate spending every year in order to receive their Social Security checks.

SNAP (food stamps) is also an entitlement program.  Here’s GettingSNAP.org:

SNAP is a federal entitlement program. This means anyone who is eligible will receive benefits. You will not be taking away benefits from someone else if you apply.

By comparison, Section 8 housing vouchers are a government program that is not an entitlement.  This doesn’t have anything to do with whether or not it’s a “welfare” program but simply because Congress appropriates a certain sum of money for the program regardless of whether it’s enough to give benefits to everyone who meets the eligibility criteria.  Those hoping to receive benefits end up on waiting lists because the number of people seeking benefits far outstrips the funds available.

Why, then, do Republicans say things like, “we have to consider entitlement reform in order to reduce the federal deficit?”  The same reason that the bank robber gave:  “it’s where the money is.”  Yes, it is true that the government could take in more revenue if Congress chose to re-raise taxes, and it’s beyond the scope of this article to discuss the question of what tax rates should look like.  But federal spending on the “Big Three” of Social Security, Medicare, and Medicaid comprise 48% of federal spending — with the remainder taken up by the military (15%), other mandatory spending like unemployment compensation, federal employees’ retirement benefits, and SNAP benefits (15%), interest on the national debt (7%), leaving only the remaining 15% for non-military discretionary spending such as transportation, education, and housing.  (That’s from 2017, as featured in a handy Wikipedia infographic.) And as a reminder, spending on these programs is forecast to grow dramatically over the next several decades.

This should not be a surprise.

Instead, it seems to have become what you might call a dog whistle, except in reverse.  Conservatives aren’t using “entitlement reform” as a means of speaking to their base that’s invisible to everyone else.  Instead, it’s progressives who hear “entitlement reform” entirely differently, as if conservatives are saying, “these are welfare programs with handouts to lazy layabouts that don’t deserve them.”

I have to admit that this puzzles me.  Perhaps this is like the Yanni/Lauren dispute or the time that my teen enjoyed finding high pitched noises on Youtube and asking me whether I could hear them, but I cannot “hear” the word “entitlement program” as anything other than a straightforward way of categorizing programs where people who qualify are entitled to the benefits rather then Congress appropriating a given amount of money each year and good luck to you if you are stuck on a wait list.

But it does appear that — for, well, People Who Are Not Me, “entitlement” is a pejorative.  For reasons that aren’t entirely clear to me, those who object to the phrase connect it up with a negative sort of behavior, “having a sense of entitlement,” meaning expecting success in life that one doesn’t deserve, for instance, for instance, a stereotypical young man feeling “entitled” to having the woman of his choice go out on a date with him or feeling “entitled” to a good grade in his college class or a pay raise or promotion regardless of effort.

All that being said, I’m very much in favor of discussing the future of Social Security, and of retirement, with a common set of facts and vocabulary.  And I’d be happy to say that if significant numbers of people are misinterpreting the expression “entitlement program,” we should change our terminology.  But I don’t see what alternate expression is on offer that expresses the core challenge of these programs, that the benefits and eligibility are fixed by law in a way that makes it very difficult to modify spending in the future.

 

December 2024 Author’s note: the terms of my affiliation with Forbes enable me to republish materials on other sites, so I am updating my personal website by duplicating a selected portion of my Forbes writing here.

Jane the Actuary Retirement

Forbes post, “Where Are All The Happy Retirees?”

Originally published at Forbes.com on November 1, 2018.

 

Readers, have you heard this nugget of wisdom before?  There’s something innate in us as humans that hardwires us to be comparatively satisfied with life as young adults, lose some of that satisfaction as we wend our way through adulthood, bottoming out during the “mid-life crisis,” but then experience renewed satisfaction as we reach retirement years.

Here’s the Washington Post, in 2017, citing a new scholarly analysis:

Happiness, those surveys show, follow a generalized U-shape over the course of a life: People report high degrees of happiness in their late teens and early 20s. But as the years roll by, people become more and more miserable, hitting a nadir in life satisfaction sometime around the early 50s. Happiness rebounds from there into old age and retirement. . . .

These similarities [among various studies] are even more remarkable given the differences in the underlying surveys, which were administered in different countries. They include the General Social Survey (54,000 American respondents), the European Social Survey (316,000 respondents in 32 European countries), the Understanding Society survey (416,000 respondents in Great Britain) and others. . . .

“There is much evidence,” the paper’s authors conclude, “that humans experience a midlife psychological ‘low.'”

There’s even a new book out, The Happiness Curve, by Jonathan Rauch, which cites extensive studies and shares individual stories of people reaching midlife and feeling a vague sense of dissatisfaction, offering readers in that midlife slump hope that they aren’t alone, that it’s a natural stage of life, and that their perception will just as naturally improve over time.

What’s more, this curve extends to a multitude of countries, though the curve itself is curve-ier in some countries, and comparatively flatter in others, according to Rauch’s book and according to an analysis from 2016 which looks at a total of 46 countries, in the form of (smoothed) curves of happiness levels and the age at which happiness bottoms out before growing again.  In some countries, such as Australia, Cyprus, Estonia, Greece, Ireland, Serbia, Slovenia, and Spain, and the U.S., curve is very pronounced, with a bottoming-out age generally in the 40s or early 50s.  In others, the “curve” is so flat or simply just downward-sloping, and the bottoming-out age so late, that it seems a bit of a stretch to call it a “U”; these include Austria (age 63.29), Finland (58.09), India (54.27), and Russia (81.57!).

But what’s noteworthy is that this study, in order to create these charts, does not simply take the raw data but rather adjusts it, controlling for “age, marital status, gender, employment, education and household income in international dollars.”  The aim, as Rauch discusses in his book as well, is to somehow derive a “pure” impact of aging alone.

But what happens when you don’t apply this analysis based on controlling for these factors but look at real people in their real lives?  The results look quite different.

Here’s a comparison of men in four regions:  the Anglosphere (the US, Canada, Australia, and New Zealand), Western/Southern Europe, the former Warsaw Pact countries (Central/Eastern Europe and the former USSR), and Latin America.

Life Satisfaction of Men in 4 regions, from 2015 World Happiness report data... [+] (http://worldhappiness.report/ed/2015/)

own chart

And here are the women in those countries:

Life satisfaction of women in 4 regions

own graph

in both cases based on data downloaded from the 2015 edition of the World Happiness Report.

Here’s the same data updated to 2018 — that is, using data from 2015 – 2017, from the working paper “Happiness at Different Ages: The Social Context Matters,” by John F. Helliwell, Max B. Norton, Haifang Huang, and Shun Wang (used with permission).

2018 Cantril ladder graphs, 4 regions, men and women.

Helliwell et al., used with permission

The data in all these cases is based on the “Cantril ladder,” a question which very simply asks poll participants to imagine “the best possible life for you” and the “worst possible life for you” and rank how they view their current life situation on a scale of 0 to 10.

(The report also provides data for Africa, the Middle East, and Asia, for a total of 9 regions, though I’m focusing on Europe, the Anglosphere, and the Americas as regions with some possible cultural similarity.  Among the Asian regions, East Asia has a similar, and actually more pronounced uptick, but I presume their strong value of revering elders is a factor.)

It is immediately clear that even in this three year span, patterns have changed in such places as NA/ANZ (perhaps due to reactions to Trump, Black Lives Matter, etc., in the U.S.?) and Western Europe (perhaps due to the impact of the mass influx of migrants starting in summer 2015?).  But what’s noteworthy is that, of these regions, only the Anglosphere region shows a pronounced U, with Western Europe and Latin America only showing a very small upward rise at the very oldest ages, hardly enough to qualify as U-shaped according to the definitions.

What’s going on here?

What happened to the U shape?  This is the puzzle.

For the former East Bloc, various sources provide the explanation that the consistently downward slope is simply the result of the misery of Putinism, and the need to adjust to the dramatic changes, albeit several decades ago by now, of a postcommunist world, having a harsher impact on older vs. younger individuals (though note that the region includes such countries as Poland and Hungary, now part of the E.U.).  It’s certainly the case that in Russia, alcoholism heavily afflicts the older generation. Perhaps the economic crises that various Latin American countries have experienced impact those residents similarly.

But no such explanation seems to fit for Western Europe, especially based on pre-2015 data, where, if anything, reports are that older folk, with secure pensions, are better off than young people stymied by a high unemployment rate or working on a contract basis without the cushy job guarantees of older workers.  It’s younger people who are living at home, unable to start families, jealous of the older generations.

And if life satisfaction in Western Europe differed from the Anglsophere in that it was steady or climbing, there’d be an easy story to tell, and it’d go like this:  “Americans have an excessive degree of ambition and desire for achievement, so that the first part of their life is the story of the attempt to attain their life goals, midlife is when they realize that they will not attain these goals, and in their later adulthood years, they have acquired the wisdom to understand that that’s not how life works.  But Europeans don’t have the same drive towards achievement and recognition, so they don’t have the same crash when this doesn’t happen.  After all, the Germans don’t even have a word for ‘midlife crisis’ except the borrowed English word.”

But Western Europeans have the same drop; they simply don’t recover.

Why?  I don’t know, and the literature I’ve read doesn’t know.  But that’s not going to stop me from sharing a few theories.

Theory One:  what if the poor economy, despite secure pensions, is impacting older people because they are watching their children struggle?  This would suggest that life satisfaction at older ages is connected up with seeing the younger generation prosper, rather than just with one’s own personal well-being.

Theory Two:  what if it’s Europe’s low birth rates that make a difference?  After all, the birth rate has been low for years and years, peaking in the Eurozone at 2.733 in 1964, at which point it began dropping steadily, to 2.393 in 1970, 2.023 in 1975, 1.774 in 1980, 1.534 in 1990, and bottoming out at 1.383 in 1995.  And, yes, if you were in your prime childbearing years, say, age 30, in 1995, you’d be at that age now when, in the Anglosphere, on average, you’d be experiencing a rebound in your life satisfaction.  But if having children is both, in part, a driver of midlife stress, and a source of postmidlife satisfaction, then the low birth rate (in addition to such factors as are causing it in the first place) could be a clue, too.

Theory Three:  what if it’s differences in religiosity?  Pew polling reports that on multiple measures, Europeans report lower levels of religious practice.  11% of Western Europeans polled in 2017 said that “religion is very important in their lives,” compared to 53% of Americans.  22% vs. 50% “attend religious services at least monthly” and 11% vs. 55% say they pray daily.  Could a religious orientation make the difference in that uptick, all other things being equal?  (Note that sub-Saharan Africa has a low and declining life satisfaction, despite its greater religious practice, but that’s hardly apples-to-apples.)

And Theory Four:  what about different “locus of control” perceptions?  This refers to differences in attitudes about the degree to which your life is what you make of it, vs. your fate largely being out of your control.  For reference, I pulled out the results from an older book (1998) on cultural differences, Riding the Waves of Culture, by Fons Trompenaars and Charles Hampden-Turner.  Survey data from 50-some countries asking people whether they “believe what happens to them is their own doing” showed a range from 33% in Venezuela to 88% in Israel and Uruguay.  The third-ranked country was Norway, even though the other Nordics were in the middle of the pack.  And countries #4 through #7 were exactly the grouping that has the “real-world” U-shape:  the USA, Australia, New Zealand, and Canada.  What’s more, the UK and Ireland (part of the Europe grouping) tie for #8 along with Switzerland.

If the uptick after midlife is at least in part a matter of being able to say, “yes, I made something of my life,” then it stands to reason that having a strong personal sense that one’s own decisions and actions have a real impact on one’s life is a necessary ingredient in feeling a sense of satisfaction afterwards.

This is all speculation, of course, but you’ll notice that none of these explanations have anything to do with the quality of state or private retirement systems, because “successful” aging is about much more than this.

 

December 2024 Author’s note: the terms of my affiliation with Forbes enable me to republish materials on other sites, so I am updating my personal website by duplicating a selected portion of my Forbes writing here.