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At PWM, we have been running financial plans to age 100 (and longer) for decades now. Some argue that it is too conservative, but we know the simple fact that Americans are living longer. Several think tanks have jumped on this crisis to tackle the economics of living to 100.
The Pension Research Council and Wharton’s Boettner Center for Pensions and Retirement Security recently hosted a panel discussion on the topic, titled "Managing Longevity Risk: New Roles for Public/Private Engagement." Here are some ideas that may gain traction:
Expanding the Market for Property Tax Deferrals
Many states already do this. In essence, this would allow a senior homeowner to defer local taxes up to $1million (if the home's value is high enough). The state would reimburse the local municipalities and be paid back from the homeowner's estate upon sale or death.
The Opportunity in Reverse Mortgages
This is another way to access the value of a home without selling it. This strategy isn't popular in the US because potential borrowers are skeptical of scams, high fees, and foreclosure fears. In other countries, public-private partnerships have innovative reverse mortgage programs for the elderly, allowing them to borrow against the equity on their homes to retrofit the properties with railings or wider doors to accommodate wheelchairs and other needs.
The Attraction of Longevity Bonds
The idea here is to transfer longevity risk to life insurance and reinsurance companies, who repackage and sell them as a bond. The hurdle is the public appetite for investments the payout out, or perform better, the sooner someone dies.
The Economics of Living to 100
by Wharton Magazine
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