Life span, COVID, more keep shifting the retirement picture
QYou write a lot about retirement. What's new and what should we be aware of? I am 68, a recently retired businessman, and want to make the most of my retirement years. Have we learned anything from the tens of millions of people who are retired? Many thanks.
AThe answer is yes, we've learned a lot. Research studies, observations, shared experiences and lives well-lived help us to continue learning about what makes for a quality retirement. We know each person experiences this life stage differently, yet at the same time there are some common threads.
“The institution of retirement is going through a radical morphing; it's being reshaped by the successes and failures of those currently retired,” says Ken Dychtwald, co-founder and CEO of research and consulting company Age Wave. This radical morphing is being influenced by trends and events that surround us. Dychtwald and Ken Cella, a principal at investment adviser Edward Jones, and their teams are authors of the recent report “Longevity and the New Journey of Retirement.”
Here are the trends identified in the report. (It's free and available at edwardjones.com — search “new retirement.”)
LIVING LONGER >> Most of us are aware of this phenomenon. What is new is that people are becoming increasingly aware that the new longevity is affecting their expectations, attitudes and preparation for this extended life stage. The 11,000 retirees surveyed in the 2022 study say they intend to live until age 89 and are hoping for 29 years of retirement.
THE BABY BOOMER WAVE >> Just by their sheer number, this generation has changed environments of the workplace, education and the home front during each of their life stages. And they are doing it again with retirement. They want a retirement that is more engaged and active as well as one that is filled with more new experiences than their parents' retirements, and are less conservative and frugal than previous retirees.
HEALTH SPANS DON'T MATCH LIFE SPANS >> This is the good news-bad news story. Life expectancy has increased about 30 years from 1900 to the present — from 47 years to 77 years. That's the good news. The bad news is we also increased the number of years older adults are living with illness, disease and disability. According to 2019 data, average life expectancy in the United States was 78.5 years; 12.4 of those years were lived in poor health, on average, leaving just 66 years of healthy living.
RETIREMENT INCOME >> Funding for retirement typically has come from three sources, often referred to as the threelegged stool of retirement: They are Social Security, savings and pensions. According to the report, the stool has “become wobbly if not completely broken.” The future of Social Security benefits is uncertain, as fewer workers are contributing to the fund in relation to the increasing number collecting benefits. Most people are not saving enough for retirement and not at the recommended level of 15% of one's income. Then there are pensions for those lucky enough to have one. Only 16% of Fortune 500 companies are offering guaranteed benefit pensions, compared with the 25% that offered them decades ago, according to the report. Note a fourth leg of the stool is emerging: income from work, because retirees either need the income or they find other rewards from working.
COVID-19 >> The final influencer is the pandemic that has disrupted retirees' health, family, their purpose in life and financial position. Older adults with chronic health conditions continue to be particularly vulnerable. The pandemic did place a heavy emphasis on technology, which left many older adults at a disadvantage; they were on the other side of the digital divide. Finally, the pandemic caused nearly 70% of Americans to rethink the timing of their retirement, either accelerating it or postponing it. According to a New York Times article from April 20, economists are surprised at the number of adults who are returning to work for “unretirements.”
These influences suggest a few messages for both older and younger people:
• We need to think about the implications and opportunities the long sought-after gift of increased longevity is providing for us and plan for them.
• We need to know that, on average, a little over 12 years of poor health are accompanying this longer life. That means more effort is needed to adapt both our science and our lifestyles to maintain and enhance our health, fitness and functioning. We need to match our health span with our life span. (Sources: World Health Organization, Global Health Observatory data repository, life expectancy and healthy life expectancy data for 2019.)
• Finally, we need to save for longevity beginning in our early earning years, not only to survive but to optimize that longevity bonus.
Next week, we'll learn about four types of retirees and what we can learn from their experiences. Stay tuned, be well and be good to ourselves and others.