A somber message to retirees

If you are a CNMI retiree you should be very concerned that your Retirement Fund may be broke within two years if the administration and the Legislature don’t act to save your pension. There is a very real possibility you may have to live your remaining years without the pension the government entered into a contract with you. Have you wondered just how long that might be? For those interested, read on to get an estimate.

This issue came to my mind as I considered the rapid diminishing resources of the Retirement Fund and the number of aging DBP retirees dependent upon their pensions when balanced against the approximate number of years of their remaining life after the close out of the Fund, which experts expect will occur in about 24 months or around 2014, if not sooner.

If you are curious about your remaining life span without a pension for yourself or a loved one, the following is something to give serious consideration. If you don’t want to know—stop here and read something else.

People responsible for calculating long term retirement payments use a very important statistical database to assist in the management of the financial resources placed in their trust as well as to determine future financial “payout” requirements, such as, for example, monthly payments to retirees.

These data are known as period life tables, which present what would happen to a hypothetical cohort (which is a group of people that share particular characteristics) if experienced throughout the group’s entire life of mortality conditions of a specific period of time. The period life table may be characterized as being a “snapshot” of current mortality experience.

Simply stated, and selecting a single hypothetical individual for purposes of citing an example, if Jose were to retire at age 65 and barring any fatal accident or catastrophic disease, statistics will tell us the average number of years of life remaining for Jose and all the others in his cohort will be 15.2 years or to age 80.2 years. Remember, it’s an estimate.

Life tables for the population in the Northern Marianas are calculated combining data for both the indigenous and non-indigenous resident population. The data presented herein are the latest available until the results of the census of 2010 are analyzed. While foreign workers are included, most tend to be under the age of 40. For my purpose, the data presented can be considered indicative of that which is expected to prevail and thus useful. As ages increase there are fewer foreign workers in each cohort series and the data become more reliable on the increasing age range scale.

The most frequently used life table statistic is the life expectancy, which is the average number of years of life remaining for persons who have attained a given age. For example, if your age is within the following age cohorts your estimated remaining life expectancy has been calculated as follows:

MALES AT AGE EST. YEARS REMAINING EST. YEAR OF DEMISE*
40 36.5 2047
45 31.8 2043
50 27.3 2038
55 22.9 2034
60 18.9 2030
65 15.2 2026
70 12.0 2023
75 9.3 2020
80 6.9 2018

FEMALES AT AGE EST. YEARS REMAINING EST. YEAR OF DEMISE*
40 40.9 2052
45 36.1 2047
50 31.5 2042
55 27.0 2038
60 22.7 2034
65 18.7 2030
70 15.1 2026
75 11.8 2023
80 8.9 2020

Source: U.S. Census Bureau
* Fractions less than a full year not calculated. Years have been rounded.

As might be expected, data differ considerably as a result of ethnicity and gender. Females generally live longer than males. Some ethnicities have a shorter lifespan than others.

For those who are now retired—select your age range from the data table presented (or as close to it as possible) and from the opposite column locate the estimated number of years remaining as the life expectancy for that particular age. Deduct two years as representing the last remaining years of your pension payments as we have been told will occur if current diminishing conditions continue. Then multiply that figure by your annual retirement annuity and you will arrive at a figure that represents your theoretical “lost” retirement income for the rest of your life after about 24 months or around the year 2014.

If your retirement income is your only source of income you are destined for the welfare register of poverty.

While a few elected officials appear to be trying to assist retirees in their effort to salvage the Fund, far too many seem not to care. If attitudes and policies don’t change on the part of some within the central government as well as the Legislature and their respective contractual, legal, and moral financial obligation to you as a retiree—if your elected representatives, don’t stop their endless talking as a substitute for a meaningful productive solution to the mess they have created it’s going to be “sorry about that” because your pension will not be available as your future years unfold.

So, here’s another problem. Since the older a person becomes the more personal medical attention becomes a costly fact of life, thus greater pressure on health providers and CHC and, of course, the NMI government’s sponsored health and life insurance program. For more on serious potential problems with this issue see the Saipan Tribune archives of Dec. 6, 2011, titled: “Message for retirees: What happens to the retiree’s Group Health and Life Insurance plan when the Fund goes broke?”

Don’t forget it was the government’s decision to opt out of participating in the U.S. Social Security program, selecting instead the CNMI’s own “locally” controlled and administered retirement program (which it was known would be outside U.S. law and oversight). Friends, do you suppose that at the time certain lawmakers saw where they could arrange for obscenely selfish and exorbitantly generous pensions for themselves. Ask Fund officials how many retired recipients over the years were paid annual pensions of $100,000 each or more. Ask how many were paid between $75,000 and $95,000 per year.

As a former Fund administrator pointed out in an article several years ago (Dec. 7, 2004), Fund records indicated the highest pension released was $150,000 a year to a retiree as a former member of the Judiciary. That amount of money is equal to paying six retirees annual pensions of $25,000 each. Several years ago an administrator of the Fund was quoted in a local paper (Dec. 7, 2004) that combined pensions for six retirees totaled $670,000 per year, which averages about $111,666 per year per person. Compare that with your pension. Now do you understand why the Social Security program was not wanted at the time a retirement program for the NMI was being considered. Don’t get “screwed” twice.

For those readers connected to the Internet, the following site displays a calculator that estimates your life expectancy. It was developed by Northwestern Mutual Life. It’s interesting that there are only 13 questions. Yet, they can predict how long you’re likely to live. Just be honest with your answers. Go to: http://media.nmfn.com/tnetwork/lifespan

For still another source for estimating life expectancy, Google the Social Security Life Tables. Find your age and the corresponding years remaining of life opposite your age. Then determine how many years you will be without a pension and the lost amount over your remaining lifespan.

If things don’t change and the government continues on its present course, the iceberg is in front of you as a retiree and there are no lifeboats on the horizon. So think about this. It’s not only the retiree who will suffer when their individual pension is no longer available; their entire family will be saddened and in some measure adversely impacted. The retiree’s surviving parents, siblings, aunts and uncles—many family members will feel the loss and the strain. Add to this the monetary loss to the economy by reduced consumer expenditures as well as also the hidden increased cost to the government required to fill the breach by increasing government social and welfare programs for the new island poor. I wonder if the politicians have thought about the above as a “multiplier meltdown.”

[I]Editor’s note: The author, as a forensic economist, often utilizes life expectancy data, inflation and discount rates related to assignments within the judicial process. www.cnmi-guide.com/phm/esc/#forensic. He has more than 50 years experience with various economic development issues both internationally and within the NMI. Stewart has published more than 300 articles concerning various island issues, most of which are in Saipan Tribune archives.
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