Advances in the development of health care and the increased cost of providing that care are serious considerations for pension fund executives and investment managers.
Speaking Tuesday at Pensions & Investments' Global Future of Retirement conference in New York, Gregory W. Smith, executive director of the Colorado Public Employees' Retirement Association, Denver, said the cost of providing maintenance drugs to retirees keeps him up at night more so than the concerns of people living longer.
Mr. Smith cited cholesterol drugs, which cost “thousands of dollars a month. That is what breaks the bank,” he said. “I don't see how we are going to solve that. It is a huge challenge ahead.”
Mr. Smith was speaking on a panel considering the intersection of demographics, finance and investing around the globe.
The panel also looked at increasing longevity.
“In the last 80 years, we are now living 26 years longer,” said Andy Acker, health-care analyst and portfolio manager at Janus Capital Group. “Therapies are addressing the leading causes of death.”
Mr. Acker said there is talk of people living infinitely, and that someone today could even live to be as old as 150. While he isn't convinced that will happen, he said longevity would be a major issue. “We have to think for 30 years (of retirement now), but what if we have to think about retirement for 70 years?” he asked.
“I do think retirees are going to live longer than ever before, and we do need to think about how we are going to provide enough savings for them for that longer period of time,” Mr. Acker said.
The panel also discussed the different trajectory of demographics in emerging markets. Demographics favor emerging markets, with countries such as India expected to hit its peak working population in 2040, said Jason Nogueira, associate portfolio manager at T. Rowe Price.
Comparatively, the U.S. peaked in 2005 and Japan, in 1990.