Retirement blogs to help advance your work: more support for "Key Demographics in Retirement Risk Management"?

Note: I hope that you will find these retirement blogs to be educational, bringing you hard-to-find and useful information often supported by innovative 'mining' of microdata files — another to support buyers of "Key Demographics ..." . The intended audience for these blogs includes all reasonably well-read persons concerned with issues linked to persons' later-life transitions, one of which is retirement from a job and eventual final departure from the labour market. Thus even people who, like my mother did, found no practical meaning in their lives for the notion of "retirement" will find some of the forthcoming blogs to be educational.

All parts of some blogs are presented at this web site. Each has its own web page. Others are PDF files whose opening sections are shown below at this page.

Table of Contents

• (Blog 1) Unpack the Unemployment Rate to get a Better Picture of Economic Hardship Among Older Workers, by Leroy O. Stone, Département de démographie, Université de Montréal (click here to go to the article)

• (Blog 2) Comprehensive Personal Risk Management “On The Ground” -- How to Do It, Part One, by Leroy O. Stone, Département de démographie, Université de Montréal (click here to go to the opening sections of the PDF file you can download)

• (Blog 3) Will You or a Family Member Have Access to Long-Term Care Insurance and LTC Services When you Need Them? by Leroy O. Stone ( click here to go to the article)

• (Blog 4) A New Labor Force Discouragement Index Based on Monthly Gross Flow Data Points to Continued Weakening of Older-Worker Confidence Through Summer 2012 by Leroy O. Stone (click here to go to the article)

• (Blog 5) Why a Great Increase of Third-Age Learning is Needed Now by Leroy O. Stone (click here to go to the article)

• (Blog 6) Why we Should Worry about Risk Awareness Deficits in the Older Population Concerning Future Out-of-Pocket Health Care Costs by Leroy O. Stone (click here to go to the article)

• (Blog 7) Time is Running Out for Older Workers Trying to Build Their Retirement Nest Eggs - Results from a New employment Hardship Indicator by Leroy O. Stone (click here to go to the article)

Blog 2

• Comprehensive Personal Risk Management “On The Ground” -- How to Do It, Part One, by Leroy O. Stone, Département de démographie, Université de Montréal

If we were to judge by the weight of literature, we would think that the issues/perils of living a really long life are all about whether you're going to run out of your money.  The buzz phrase used in this connection in the literature is "longevity risk". 

But if you have spent much time close to relatives who have lived really long lives, they will have taught you from their experiences and their expressed thoughts that the issues associated with living a very long life include some important non-financial ones.  These involve such items as social isolation, the disappearance of one's support network, and of course in many cases progressive decline of functional capacity.

These remarks imply that the management of risks associated with life-course transitions and life events in the "senior years", also known as "the Third Age", has a lot to do with things that are non-financial. One needs to address an array of risks across a highly diverse domain. 

A positive sense of control and confidence in the face of life's potential contingencies depend upon the belief that one has a good strategy for allocating one's limited resources across that highly varied domain.

Reaching for that good strategy should involve the kind of "global" or holistic thinking about later life risks that is known as "comprehensive risk management". (In talking about individual lives this may be a strange concept; but organizations do this a lot and treat it as a part of their survival strategy. Individuals need it too.)

Doing this kind of global thinking is mentally challenging;  but then why did God give us a brain?  Relevant experts believe that it is reasonably evident that perhaps 1% of humanity even begins to seriously tap the awesome power in our brains.   Facing the issues of dealing with the risks of later-life transitions, we come face to face with the necessity to draw upon our brainpower. 

But there's no need to despair; because various kinds of help are available. One kind of help takes the form of a decision support tool (computer program)  which calls upon you to provide initially certain informational inputs concerning your attributes or those of a hypothetical person.  It then carries out a significant part of the difficult anticipatory thinking that comprehensive risk management requires, and it delivers to you sets of probabilities for various important combinations of possible future life events.

The probabilities for these combinations of life events are computed by integrating information embedded in a set of reasonable estimated conditional probability distributions that are provided to the program by the developer ( who needs either to be a suitably broadly trained social scientist, or to have such persons in her or his development team). This integration process is done by the computer program as it executes. (The process is parallel to what Boeing does when it does its risk management thinking about the capability of a newly designed aircraft to safely handle a variety of atmospheric conditions and get back to earth in one piece. If this reference to manufacturing new airplanes seems far-fetched, you can come closer to home by thinking about disability-free life expectancy for people that have reached a certain age, something that is widely calculated these days. This is concerned with the joint probability of surviving to some other age and at the same time being free of consequential disability.  Practically everyone now understands that this is perhaps as important as the simpler probability of merely surviving to that particular future age.)

Let us use the phrase  "output probabilities" to refer to what the decision support tool produces for your use in connection with some important life contingencies involving certain "convergences" of life events  -- e.g., loss of spouse, breakdown of your social support network and sharp deterioration in functional capacity. You would  merge these output probabilities ( for some important combinations of life events) with your own estimates of their consequences and your own assignment of priority to them, in order to get to your decisions concerning how to allocate your scarce resources as a risk manager.

If you have serious trouble interpreting and making use of these probabilities, there should be professional experts available to help you to interpret them. How the computer program does what it does may be "Greek" (Greek-speakers call it a microsimulation model); but what it produces at the end are numbers that a lot of people can interpret without much trouble. An illustration of pertinent interpretive ideas is given below.

Such a tool is now under development, with the support of colleagues and students at the University of Montréal. The field of variables to be covered by this tool when it is fully developed (if God is friendly, that should be in late 2013) is as follows:   arrival of caring responsibilities, loss of spouse or partner (via death or family breakdown),  getting a moderately high or very high score on an index of  incapacity in basic and instrumental activities of daily living (ADLs and IADLs), getting moderately low or very low score on an index of the strength of the available social support network,  decline of access to earnings-based income (including both voluntary and involuntary job loss/quit), as well as some some income- or capital-related events.  Age, sex, marital status, cultural background, education,  immigrant status, and employment history, are “background attributes” that  enter into the list of “conditions” that determine what distributions will govern a particular Monte Carlo assignment of a value for a simulated event.  Of course, some of these variables change as a result of a simulated life event. Others change in already know ways, as time passes.

I am pleased to present in this article evidence of our initial progress. The specifications and data you see below deal with a small part of the wide domain which I just indicated, and if all goes well I will provide future progress reports as new modules are successfully brought into the program.  (A small “techie detour” here: Microsimulation is very old in demography; but it is usually deployed to model changes in selected aspects of composition and of demographic rates for a whole population.  Our program, focusing on risk management, deals with the evolution of the life course of a designated virtual person.  However, the outcome probabilities can be interpreted the same way that people interpret the results of computing disability-free life expectancy:  “if a cohort lived for N years under a designated regime of certain probabilities, then its expectation of X will be the number K”.)

(Click here to get the full article -- a 9-page PDF file)

In Chapter 1 you will find an exposé on the basic concepts and theory regarding comprehensive retirement-related risk management.

Note: More blogs are coming in future weeks.

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(c) 2012 Leroy O. Stone. All rights reserved.