Hi, I’m Carl Tannenbaum, Chief Economist for Northern Trust.

I still think of myself as a young man…until my back creaks getting out of bed and I get a good look at myself in the mirror.  I can turn the clock back a little bit with a mouthful of vitamins and a hot shower, but there is no doubt that I have reached a certain age.

There is some small consolation in knowing that I am not alone.  Around the world, the postwar generation is getting up in years.  As much as we might think ourselves vigorous, we are no longer powering our economies the way we used to.  And if we aren’t careful, the collective aging of societies could become a substantial headwind to growth.

Demographic trends are based on simple math.  Births, deaths, life expectancy, and immigration are the four basic inputs.  Absent watershed events, these quantities move slowly and predictably.  Long-term trends are therefore relatively easy to anticipate.

Developed countries should therefore not be surprised at the impact that demographics are having on their economies and their finances.  Wealthier nations tend to see their birth rates drop, as prospective parents stand to lose more income if they take time off to raise children.  Life expectancy extends, thanks to better nutrition and health care.  This creates the potential for an excess of older people versus younger ones.

World War Two created a demographic disruption whose impact is being keenly felt today.  As the baby boom retires, they rely on a much smaller cohort of working-aged people for support.  Retirees are living longer, extending the annuity of benefits they receive.  And in their advancing age, they accumulate health care costs well in excess of what earlier generations incurred.

Make no mistake: it is a good thing when people live longer.  But if economies have not prepared for that outcome, they can struggle.  Shrinking labor forces hinder output and raise inflation. Pension and health systems, no matter how they are structured, become stretched.  Substantial fractions of national budgets are devoted to old age support, raising debt and limiting the resources that can be invested for the future.

To age gracefully, societies will have to adopt sound policies.  Immigration must be given a fair hearing.  Social security systems must balance revenue, retirement ages, and benefit levels to remain solvent.  Medical systems will be challenged to optimize the length and quality of life at a cost that does not place undue burdens on old or young.  These equations are not easy to solve, but there are solutions available; in the end, no one will get everything that they want.

Much as I might wish it were possible, there is no way to turn back the clock.  The best that I can do, and societies can do, is accept everything that comes along with aging and make the best of it.  That mindset will be essential to making our golden years golden.

And that’s the view from here.