For some people, retirement can inspire thoughts of freshly ground coffee beans and a perfectly manicured golf course. It signals the start of new beginnings, with fun hobbies and the exploration of the world’s wonders. For others, retirement will not signify a major change to their lives. They have no intention of stopping work, as it’s what motivates them and brings them joy. For these people, retirement is about much of the same, with the potential for a bit more downtime or setting some time aside to try new things. Whatever your personal views of retirement, it’s worth exploring how the approach to retirement has changed over the years and what you need to be aware of when planning for the later stages of life.
The age 65 was chosen in 1881.
Retirement at 65 is attributed to the German ‘Iron Chancellor’ Otto van Bismarck. In an attempt to win favour with the German working classes, the ‘Iron Chancellor’ offered favourable social security to workers once they reached the age of 65. While this concept initially appeared socialist and noble, the reality was that it was a crafty political play. The life expectancy back in 1881 was well below 65 and hardly any workers reached the age of 60.
We’re healthier at 65 than ever before.
Fast-forward almost 140 years, and the world has changed dramatically. Life expectancy is now over 80 years of age amongst the majority of developed nations, and this figure is rising rapidly. By 2050, 30% of society will be over the age of 60 in developed nations. Yet despite all the advancements in society, we still hold onto a retirement age of 65 that was established over a century ago. The truth is we will live longer and will need to be able to financially support ourselves.
65 is just a number for those that want to continue…
The traditional view of retirement is that we put down our tools completely on our 65th birthday. We had jobs that we did out of necessity and when the chance came to stop, we grabbed it with both hands. Now, we can continue contributing to society and doing what we love, out of choice, no matter our age. So, why should people at the age of 60, 65 or 70+, with their wealth of experience and advanced skills down tools and give up, what for many, is their purpose in life? Why go out when they’re at the peak of their powers?
And for those that don’t.
The population is becoming older. As we have seen, the era of generous state and final salary pensions has finished. There will be less financial assistance in old age compared with previous generations. Retiring at 65 means that, conservatively, people will need enough savings to support themselves and their lifestyle for 15 years. In reality, this figure could be far higher. For younger workers, reaching 100 and being in good health is a distinct possibility. As a result, the number of people aged 70 or over in the workforce is rapidly rising. Many are forced to continue working to cover basic expenses.
Mindsets are also changing.
In the past, people would wait until they finished work to follow their passions. Personal happiness was secondary to work. Now, people of all ages are approaching life differently, and have a different outlook on what they want from life. They want to be able to do the things they enjoy throughout life, not just at the start and the end of their careers, with a healthy work-life balance. No longer do they need to put experiences on hold.
So, what does ‘new retirement’ look like?
The current definition of retirement is along the lines of ‘ceasing to work.’ However, people can, with the right combination of support and resources, continue to offer their skillset to the workforce, follow their passions and feel safe and secure knowing their money is working for them. This is the ‘new retirement’. With money coming in at multiple stages of a person’s life, people can experience multiple mini-retirements throughout their lives.
Is this really possible?
With the right financial tools in place, people have the freedom to live a new retirement and the world of work is helping support this. Rarely will anyone stay in the same job, or even same field, their whole career, thanks to an ever-increasing number of opportunities. Technology has also enabled people to work on the go. No longer chained to their desks from 9-5, 5 days a week, people have gained access to multiple learning tools and the ability to connect with people all over the world, for personal and professional purposes. In short, people have far more control over their time at and away from work, with 24/7 access, not only to revenue streams but to friends, family, and fun. They can live a life they love and do it for as long as they live.
To help clients prepare for the new retirement and achieve their unique goals, financial advisors need to develop a new approach, looking at what their clients want to achieve now, in the next year, and in the many years to follow. Continental, for example, is embracing the need for people’s freedom and ambition with a new programme called Freedom 365. It looks to give people the financial tools to succeed at navigating the world’s new realities.
When life expectancy breaks 100 years, the first people reach 200, and technology can prolong life indefinitely, it’s probably safe to assume retirement will have dramatically different connotations. The average person could have 30+ career changes. Apprenticeships for the over 80’s? Universities full of Centurions? Whatever happens, retirement will continue to evolve and the way we approach it will need to evolve, too. In the meantime, we believe that people should never stop doing what they’re good at, what they enjoy, and should never stop learning new skills. Retirement should be the start of something new, be it consulting for 3 days a week or starting a new enterprise, with ample time to travel and experience new cultures in between new and existing ventures.
New retirement is living a full life, even if it means not working full time.