The Perspective Blog
The Northwood Perspective

Demographic Disruption: How an Aging Society Will Change Everything

Lauren Ambrosetti

As the world stands on the brink of the largest wealth transfer in history, estimated at $68 trillion over the next 20 years, the implications of the broader economy and household financial planning are profound. This seismic shift, set against an aging global population, requires ongoing reevaluation of family succession planning and investment strategies to appropriately navigate and plan for the long-term.

Global Trends

Global aging trends are reshaping societal structures, with increasing longevity and declining fertility rates as the main drivers. A monumental shift in demographics is underway with the population aged 65 and older emerging as the fastest-growing group globally. This aging phenomenon is reshaping economies, labor markets, and social structures, indicating a need for comprehensive adjustments to our current systems, i.e., healthcare and pensions.

According to the OECD’s projections in 2050, the old-age dependency ratio – the number of people 65+ for every 100 working age people (20-64) - will continue to rise globally. The highest ratio (80.7) will be found in Japan and the lowest in India, (22.5).

Source: Pensions at a Glance

Living Longer

The 65+ population is growing partly because people are living longer. In Europe, the ratio of the working population to retirees is narrowing, with only two workers for every retiree, signaling potential economic strain and challenges in sustaining pension systems (recent French protests highlight the challenge). And while the transition away from work exists, it is not merely an economic concern, but also a matter of health and well-being, particularly for those who may lack social interaction post-retirement. Continuous engagement in work or community is crucial for maintaining mental and cognitive health, underscoring the importance of creating opportunities for older individuals to meaningfully contribute to society on their terms.

Japan's aging crisis illustrates profound societal impacts, with more adult diapers produced than those for babies, highlighting the scale of care and support required by the elderly. And, according to Reuters, China’s National Bureau of Statistics reported a drop of roughly 850,000 people for a population of 1.4 billion in 2022, marking the first decline since 1961, the last year of China's Great Famine.” Meanwhile, even in India the fertility rate is falling below replacement levels, and points to a global demographic shift that could impede economic growth.

Focusing on Canada

The situation in Canada reflects the broader challenges, with warnings of a decreasing GDP per capita, CPP shortfalls, and further strain on current healthcare systems by the end of this decade. The Fraser Institute projects Canadian GDP per capita will decline between 5-13% by 2043, which is significant!

As nations like Canada grapple with the economic impacts of demographic shifts, encouraging longer workforce participation and leveraging the aging population's is one emerge as potential strategies to mitigate economic challenges. From pensions to labor policies, a reimagined approach that values and integrates the contribution of the older population is essential for sustaining economic vitality and social cohesion in the face of an unprecedented aging society. The idea of complete retirement of large swaths of the Canadian population is very dangerous for our future.

Dramatic demographic and migration shifts create opportunity to redefine societies as we adjust to an aging population and adapt our systems to meet the newfound healthcare system and retirement pension demands. This coupled with the aging population’s ballast of savings and longer life expectancy are to will contribute to unprecedented opportunities of the future.

What Does It All Mean?

Our aging society will undoubtedly present significant challenges in the coming years. Here in Canada, robust immigration policies will help mitigate some of these impacts. However, to effectively address the multifaceted needs of our aging population, our society must embrace change and innovation in new ways. This includes fostering longer workforce participation, improving savings and investment rates, facilitating aging-in-place initiatives, and promoting intergenerational equity. Yet, in 2024, there seems to be a diminishing willingness to work collaboratively across generations, leading to a growing trend of intergenerational tension, with grievances expressed among Baby Boomers, Millennials, Gen Z, and even the emerging Alpha generation. Nevertheless, amidst these challenges lies an opportunity for dialogue and understanding, fostering a more cohesive society where each generation can contribute its unique strengths towards a shared future. By openly discussing these issues, we can actively work towards addressing them and building a more inclusive and harmonious society for all. Challenges and considerations in family succession planning amid demographic changes.


Lauren Ambrosetti

Lauren is a member of Northwood’s family office advisory and investment teams, working with families in the areas of financial planning, investment management, and taxation.

Read More