Can we afford to live to 100?

Retiring at 60 is a relatively new concept. As populations age – and age better – people are looking for ways to stay in work and sustain their retirement income. We present five charts that sum up the changing landscape.

Average years spent in retirement (UK)

The idea that in one’s sixties it might be time to step out of work and retire into a life of leisure is relatively recent. Just over a century ago, people in the UK died on average 23 years before the official retirement age.

Ageing around the globe: a greying population 2015-2050

The odds of living to 100 are around 50/50 for a 20-year-old in a Western developed economy. By 2050, reaching a century won't be exceptional. But in many countries a significant proportion don’t reach age 65. That is still expected to be the case in 2050.

Source: Transforming World Atlas, Bank of America Merill Lynch, July 2018.

Today, increasing longevity is disrupting the three-stage life-cycle of education, work and retirement. Built on a life expectancy of around 70, it is unsurprisingly not coping with life expectancies far higher. (The next generation could live to between 95 and 100.)

“More years were added to human life expectancy in the 20th century than were added across all prior millennia of human evolution combined,” says Professor Laura Carstensen of the Stanford Centre on Longevity, California. “In the blink of an eye, we nearly doubled the length of time that we are living.”

US data only.

The people most affected by these changes are in their 60s. Many enjoy better health and fitness than what was expected when the idea of a three-stage life was born.

In their desire to carry on working, it’s almost as if they’ve set aside the notion of retirement. The idea there is a single age at which everyone comes to a hard stop is already outdated.

With low interest rates, many will struggle to save enough by their mid-60s to support themselves for a long time. Retiring in one’s 60s or earlier might – once again – become the exception rather than the norm.

The labour-force participation of over-55s in the US over time shows retirement as we know it could be over.

With emerging “many stages of life”, work might become more varied. There’ll be opportunities to develop skills in new areas. Some will redeploy into lower-paid work with social purpose, become an entrepreneur in later life or bridge two different occupations.

Less rigid gender roles, with more sharing between income-earning partners, seem likely. Education could become as vital for older people as it is for the young. It’s unlikely choices made in your teens with training into your 20s will deliver skills for a working lifetime.

As skills shortages emerge, using existing talent for longer, drawing on the knowledge of multiple generations and reducing staff turnover make sense for companies too. But to do so, they will need to be more flexible than today.

This is also leading to multi-faceted, flexible models of retirement income.

“Right across the globe, the idea that the state should guarantee retirement provision is becoming outdated,” says Charlie Jewkes, head of global financial institutions at Aviva Investors. “This is a huge issue, because it will mean that everyone will need to take greater financial responsibility.”

If the notion of a multi-stage life is right, we need to question the whole concept of a pension because of our need for assets at different times of our lives.

We now need to look at: health, relationships, education as well as work. This means we need to think differently about when we shuffle money from one period to another. That process is also going to be much more individualistic.

Ultimately, a three-stage life can only be arranged in one way: you get educated, have a job and retire. Yet you can arrange a multi-stage life in lots of ways.

Different people have different needs, and so no ‘one size’ will ever ‘fit all’. The best providers will ask customers what they really want and will be able to help them achieve that.

Enquiries:

Rob Davies
Head of PR and Thought Leadership
Rob.davies@avivainvestors.com 

James Whiteman
Head of Client Communications & Content
James.whiteman@avivainvestors.com

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