The mortality burden of the COVID-19 pandemic was particularly heavy among older adults, racial and ethnic minorities, and those with underlying health conditions. These groups are known to have higher mortality rates than others even in the absence of COVID. Using data from the 2019 American Community Survey, the 2018 Health and Retirement Study, and the 2020 National Vital Statistics System, this paper estimates how much lower the overall mortality rate will be for those who lived through the acute phase of the early pandemic after accounting for this selection effect of those who died from COVID. Such selection may have implications for life insurance and annuity premiums, as well as assessments of the financial standing of Social Security – if the selection is large enough to substantially alter projected survivor mortality.
The paper found that:
10-year mortality rates, absent direct COVID deaths and long COVID, will likely be lower in 2021 than anticipated in 2019.
However, these differences are small, ranging from a decline of 0.4 percentage points for people in their 60s to 1 percentage point for those in their 90s.
The small difference is in spite of the fact that COVID mortality was, indeed, very selective, with mortality declines exceeding half the maximum possible declines, holding total COVID deaths constant, for every age group.
The policy implications of the findings are:
That declines in mortality due to COVID selection likely will not impact overall population mortality substantially enough to affect Social Security cost projections.
Any impact of selection effects on Social Security costs will likely be swamped by ongoing mortality increases directly attributable to acute and long COVID.
Author(s): Gal Wettstein, Nilufer Gok, Anqi Chen, Alicia H. Munnell
Publication Date: August 2022
Publication Site: Center for Retirement Research at Boston College
Mr. Majeed is the investment chief for an $18 billion Ohio school pension that provides retirement benefits to more than 80,000 retired librarians, bus drivers, cafeteria workers and other former employees. The problem is that this fund pays out more in pension checks every year than its current workers and employers contribute. That gap helps explain why it is billions short of what it needs to cover its future retirement promises.
“The bucket is leaking,” he said.
The solution for Mr. Majeed — as well as other pension managers across the country — is to take on more investment risk. His fund and many other retirement systems are loading up on illiquid assets such as private equity, private loans to companies and real estate.
So-called “alternative” investments now comprise 24% of public pension fund portfolios, according to the most recent data from the Boston College Center for Retirement Research. That is up from 8% in 2001. During that time, the amount invested in more traditional stocks and bonds dropped to 71% from 89%. At Mr. Majeed’s fund, alternatives were 32% of his portfolio at the end of July, compared with 13% in fiscal 2001.