Calibrating Gompertz in reverse: What is your longevity-risk-adjusted global age?

Moshe Milevsky

Insurance: Mathematics and Economics, 2020, vol. 92, issue C, 147-161

Abstract: This paper develops a computational framework for inverting Gompertz–Makeham mortality hazard rates, consistent with compensation laws of mortality for heterogeneous populations, to define a longevity-risk-adjusted global (L-RaG) age. To illustrate its salience and possible applications, the paper calibrates and presents L-RaG values using country data from the Human Mortality Database (HMD). Among other things, the author demonstrates that when properly benchmarked, the longevity-risk-adjusted global age of a 55-year-old Swedish male is 48, whereas a 55-year-old Russian male is closer in age to 67. The paper also discusses the connection between the proposed L-RaG age and the related concept of Biological age, from the medical and gerontology literature. Practically speaking, in a world of growing mortality heterogeneity, the L-RaG age could be used for pension and retirement policy. In the language of behavioral finance and economics, a salient metric that adjusts chronological age for longevity risk might help capture the public’s attention, educate them about lifetime uncertainty and induce many of them to take action — such as working longer and/or retiring later.

Keywords: Pensions; Insurance; Retirement; Longevity risk; Biological age (search for similar items in EconPapers)
JEL-codes: G22 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:92:y:2020:i:c:p:147-161

DOI: 10.1016/j.insmatheco.2020.03.009

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