The idea of stepping out of work at age 60 or so, and retiring, into a life of leisure is relatively recent. But with more people living longer, expectations of retirement are being reshaped.
The idea of stepping out of work at age 60 or so and retiring into a life of leisure is relatively recent. But with more people living longer, expectations of retirement are being reshaped.
Brian Loughans’ ninth decade has not been spent sitting on the sofa, slippers on, catching up on daytime TV. This former RAF pilot, air traffic controller and taxi driver has spent his eighty second year delivering Indian takeaways to the good people of West Yorkshire.1 Brian is not alone. He joins the ranks of people around the world working in later life.
We shouldn’t be surprised at such stories. Recently, life expectancy has been increasing by around one year every five years2, and the number of older people in employment continues to grow.
More years were added to human life expectancy in the 20th century than were added across all prior millennia of human evolution combined. In the blink of an eye, we nearly doubled the length of time that we are living.
So, what does this mean?
If a seventy-year life equates to around 611,000 hours, a century equates to 873,000 hours. But following the financial crisis (low interest rates, lower return expectations3), many will struggle to save enough by their mid-sixties to support themselves for an extended period.
Globalisation and applied technologies have helped keep inflation low, which has in turn kept interest rates low as well. The exceptional measures taken by central banks after the financial crisis have also played a part. Interest rates are yet to recover, hurting savers more than a decade on.
But, as well as having a dampening effect on real interest rates, shifting population dynamics creates new investment opportunities. Healthcare, medical appliances, personal care services, robotics and other technologies supporting independent living, financial services, leisure and property – these are all fields morphing to reflect grey spending power.
Forced to work?
There are two ways of considering the impact of these trends.
Firstly, some people will be forced to work longer as they struggle to save enough to maintain a satisfactory standard of living once they step out of the workforce.
But, on the flip side, others may embrace additional years of work for health and wellbeing reasons – many retirees struggle to replace the sense of purpose they had during their working lives.
For some, a blend of the these two factors may apply.
Retiring in your sixties or earlier might become the exception rather than the norm. Quite simply – it could end retirement as we know it.
On the upside, work might become more varied, with opportunities to develop skills in new areas.
Redeploying into lower-paid work with social purpose, becoming an entrepreneur in later life or bridging two quite different occupations won’t be impossible. And less rigid gender roles, with more sharing between income-earning partners, seem likely too.
With more years to fill, education could become as vital for older people as it is for the young. It is unlikely choices made in your teens with training into your twenties will deliver skills for a working lifetime.
There should be more time for leisure, too. Signs are already emerging of a striking upturn in older people heading to the gym, with facilities springing up to meet the needs of older exercisers.
Planning for a multi-stage life
Another knock-on effect is that everyone will have to take greater financial responsibility for their futures.
At present, it can be time consuming to find answers to even the most basic questions – like ‘how much do I have in my savings pots?’. To get the answers, you might need to deal with multiple companies on various platforms, as well as the administrators of the state pension.
Numerous job changes (more than 11 in an average working life) and house moves make it easy to become disconnected from one’s own assets.4
This is a problem initiatives like the UK’s Pensions Dashboard Project seek to address, as billions of assets lie unclaimed by savers. In the future, the process might become easier – not only to identify pension savings, but also to monitor and control what is held in investment portfolios.
Ultimately, a holistic view would encourage greater understanding of the current position and an appreciation of what could be done to improve it.
In the accumulation phase, the opportunity costs of undertaking a second degree or a career switch would be clear. In decumulation, it could improve understanding of the implications of certain choices. For example, the cost of shifting part-time, drawing income that exceeds natural equity dividend yields, or how mortgage release will deplete assets overall.
Meanwhile, pensions freedoms (that allow people to take quite radical steps accessing lifetime savings from the age of 55) mean a greater focus on addressing longevity risk and delivering lifetime income to tomorrow’s retirees is required.
Asset managers in the US and Australia already highlight its importance for those who might go on to become centenarians or even super-centenarians.
Discussions are under way over the precise combinations of assets that could potentially enhance investment outcomes quite materially. For example, including an allocation to illiquid assets such as private credit could, in theory, help achieve this.
Living with longevity: a gift, not a curse
With expectations of life changing radically, it makes sense to step back and consider the reality of being elderly. Interestingly, more time on the planet is not resulting in more time being ‘old’. In fact, it seems to be leading to “down-ageing” – where people behave younger than their biological age.
“Older people are really very varied. They are more varied than younger people in almost every way,” she says. She cites studies of identical twins that have shown environment trumps genetics when it comes to ageing. Factors like exercise can have clear effect on age-related decline. As a result, there can be extraordinary variety in the capabilities of people of the same age, even with an identical genetic make-up.
These considerations are important for companies struggling to fill posts, and will be more so in the future as the active workforce shrinks.
Think of Japan where unemployment is at a record low, and where job adverts welcoming applications from the over-60s have increased eightfold over the past two years.5
Looking to older workers may also be pertinent for companies simply seeking to engage better and more directly with their greying customer base.
So, there is a strong case for age diversity and inclusivity.
Companies will miss an opportunity if they do not accommodate the very large and highly experienced baby-boomer cohort currently approaching retirement.
Doing away with the rigidities of retirement and employing or backing older workers is not virtue signalling; it makes business sense. Expect more of it in the future.
Longer lives are changing the nature of work and retirement irrevocably. Although having more time on the planet is a wonderful opportunity, it also brings practical challenges, including the need for income to sustain oneself for years and years.
Varied paths that combine paid employment, work with social purpose, learning new skills, plenty of interaction with others and health-giving exercise are all worth investigating.
To make the most of retirement in the future, it might be best to shelve assumptions about what retirement means. The man who began working as a waiter at 89 as he was “dying of boredom” will be an inspiration to many.6
1. Brain Loughans, 82, delivers takeaway curries in a suit and tie. BBC. 27 November 2018
2. Lynda Gratton and Andrew Scott. The 100-Year Life. Bloomsbury. 2016.
3. We’ll live to 100- How can we afford it? World Economic Forum. May 2017
4. UK Pensions Dashboard. https://pensionsdashboardproject.uk/
5. Adverts on the job listing website Baitoru, run by recruitment agency Dip.
6. 'Bored stiff' Paignton pensioner retires aged 91. https://www.bbc.co.uk/news/uk-england-devon-43434767