The idea of retirement, pensions and benefits is only a century-plus old. The redefinition of retirement is underway — and being shaped by individuals navigating a profoundly different context of old age.
Retirement was once a short period of life after work. Today, people are likely to live to 85-plus years old, making retirement last decades, not just a few years.
According to AARP, nearly 40% of Americans age 50 and older expect to work "until they drop." For many, work in retirement is about ensuring that one's "wealthspan" is as long as one's lifespan. Work is also about meaning, a reason to get up in the morning. Perhaps most importantly, it's a way of getting out of the house. In one MIT AgeLab study, a respondent was asked why he went back to work in retirement; his wife interjected quickly, bringing both a chuckle and an insight — "I married him for life, not for lunch."
Families, not finances alone, have always been key to retiring well, with adult children, spouses and siblings providing support for tasks such as home maintenance, transportation and caregiving. But the average family of today is smaller and more fragmented. The highest divorce rate is now among those age 50-plus. Gray divorce has increased nearly 700% since 1960. Moreover, the baby boomers and Gen Xers had fewer children than their parents. Fewer children, working children and children that live across the country unable to provide support means a new cost in retirement — replacing the adult child.
An increasing number of retirees, especially women, live alone. How to complete the everyday tasks that might once have been shared with a partner or adult child at a manageable cost is a growing challenge.
Retirement plan sponsors and the broader financial services industry already are finding that educating people about the cost of retirement is not enough to influence savings behaviors. Instead, an expanded role that helps people navigate decades of life after work is evolving. Educating people about the changing context of life in retirement with concrete, easy-to-visualize stories about life after full-time work might prove to be a more effective means to engage people in pre-retirement behaviors.
The longevity economy is both a great investment opportunity and disrupter to current ideas of work and retirement. A new investment thesis for the aging population, one that includes but goes beyond the health needs, must emerge. The next-generation older consumer was excited and delighted by new products, services and experiences at every prior life stage. They are not likely to lower their expectations in retirement. A multigenerational workforce with a diversity of attitudes and behaviors will bring challenges, but also will introduce a more creative workplace.
Today's retirement plans and engagement strategies were written for yesterday's retirees. The longevity economy now requires a different retirement narrative — one that includes financial security as well as a story that helps people navigate the new old age.