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Retire? What For?

By: Ken Dychtwald

More and more people around the world choose to keep working past the age of retirement, says research by HSBC on the future of retirement. Ken Dychtwald, of Age Wave, looks at why we think we want to retire at age 65 and why many of us decide not to.

Who wants to retire? Not many people, according to research recently conducted for HSBC on ‘The Future of Retirement’ – at least not if you use the traditional definition of retirement. Of the more than 10,000 people polled in 10 countries on four continents, four out of five (80 per cent) said individuals ought to be free to go on working for as long as they want, if they are still capable. And, almost as many intend to do some kind of work after they reach retirement age.

Work, it seems, is only a problem if you’re forced to do it. When free to choose, people almost universally prefer to remain productive and engaged as it makes them feel valuable and connected to the world. As well, even for those who have plenty saved up for retirement, it adds to feelings of financial security. Perhaps most importantly, work bridges the gap between young and old, bringing people of all ages together.

It was Prince Otto von Bismarck, the famous ‘Iron Chancellor’ of Prussia, who set the retirement age at 65 when he invented the modern pension in 1889. It is amazing that this out-of-date marker has persisted so long. When it was set, the average life expectancy in the West was around 45 years – which meant that conveniently few people survived long enough to retire in Bismarck’s Germany. In 2000, life expectancy at birth in the West passed 77 years, and yet the standard retirement age is still 65 – despite the fact that many people have another two or even three decades of healthy, active life ahead of them at that age.

‘Golden Years’
Retirement at 65 was further reinforced by state and company policies after the Second World War. This was the age of the ‘golden years’ model of retirement, so called because the phrase was used to advertise Sun City – one of the U.S.’s first ‘retirement communities.’ In the ‘golden years’ model, life proceeded through a predictable series of stages. Childhood was immediately succeeded by education or apprenticeship; you got hired in your late teens or early 20s, then got married, set up house, and had children. Child-rearing lasted through your 20s and 30s, succeeded by middle age, more senior jobs, and then, with all items on life’s to-do list neatly ticked off, you retired at 65 to relax and quietly snooze away your few remaining years.

It probably never suited most people to be so regimented and it certainly doesn’t suit us now. In fact, the rigid conveyor belt that dumped responsibilities and duties in people’s laps – or took them away – according to age is being ignored by increasing numbers of us. People have babies later (in Australia and New Zealand, the majority of births will soon be to women in their 30s) or not at all. In the U.S., one in five (19 per cent) women aged 40 to 44 are childless, compared with just one in 10 (10 per cent) in 1980.

And more people are forsaking traditional working patterns, with the number of selfemployed jumping by 40 per cent in Britain since the mid- 1980s, while in Japan the phenomenon of people (one in 10 single people between 20 and 34) jumping freely from job to job, never settling down, has led to the coining of a new word, ‘freeter.’

More Than One Career
Increasingly, what’s occurring throughout the world is that people want to have more than one career and they want to intersperse their working lives with periods of education – for retraining or for self-development. And, as they mature, they want a time for recreation and travel. In addition, more and more people are selfemployed, adding to their skills and steering their careers as they see fit, managing portfolios of different jobs. And ‘gap years’ are now just as likely to be taken by people in their 50s or 60s as by 18-year-olds. In keeping with these changes in working lifestyles, a model seems to be emerging of a retirement that includes ‘cycles’ of work, leisure, and education. Almost half (48 per cent) of the people in our research wanted such a flex-retirement.

History provides us many role models for late life productivity. Grandma Moses didn’t start painting until she was almost 80. Galileo published his masterpiece, ‘Dialogue Concerning the Two New Sciences,’ at 74. Frank Lloyd Wright designed the Guggenheim Museum in New York at 91. Mahatma Gandhi was 72 when he completed successful negotiations with Britain for India’s independence. Warren Buffett remains one of the world’s most-respected investors at age 75. Film stars Sophia Loren and Sean Connery are still considered sexy in their seventh and eighth decades. And, Alan Greenspan, chairman of the U.S.’s Federal Reserve Board, remains capable and wise at 78.

The growing desire for less rigidity and more personal re-invention in retirement is not just a western phenomenon. People in Asia and South America also aspire to blend periods of leisure, education, and work. This is how 66 per cent of Brazilians, 62 per cent of Japanese, and half (51 per cent) of Chinese in our research plan to retire. Perhaps they have noted Europe and North America’s disillusioning dalliance with the ‘golden years’ model, and they have moved on. Previously, retirement was mixed in South America, with some state workers retiring as young as 53 (mandatory in Brazil), but many of the population expecting their children to support them. In Asia, the family is also seen as the source of support in retirement – almost twothirds of older people in India expect their families to pay for their upkeep after they retire.

But Asian societies are changing and younger people are less likely to expect to be supported, in due course, by their own children. While half of older respondents from Hong Kong and Mexico expect their families to support them in retirement, less than a third of younger respondents have similar expectations. In Japan, six in 10 older people expect care-giving support from their families if they become ill in old age, but only four in 10 of younger Japanese expect the same.

While the new model of retirement is almost universally aspired to, it is in the U.S. and Canada that it has really taken hold. These are countries where people have conspicuously positive attitudes towards the prospect of their own aging. Two-thirds of people in the U.S. see retirement as an opportunity for a whole new chapter of life, while nine in 10 Canadians believe older people are interesting to be around and friendships between people of different generations are common in both countries.

Popular Stereotype
However, contrary to the popular stereotype, Asians polled for the research do not hold their older people in the highest regard. In Hong Kong, 33 per cent of those polled believe that older people have very little purpose in life and only seven per cent of Japanese people think that elderly individuals are interesting to be around.

The other conspicuous thing about the U.S. and Canada is the amount of preparation people do for retirement. Over half of pre-retirees in the U.S. contribute to private pension plans, while 37 per cent of pre-retirees in Canada have consulted an independent financial advisor about their retirement. In those countries, a significant number of people sit down and plan their working lifestyle – both before and after the traditional retirement age. They decide on the way they want to live, take advice, and work out a plan for achieving it.

That, unfortunately, is the rub. The new approach to work and retirement requires much more active involvement from individuals, much more planning, and much more preparation than the old uncontrolled drift into retirement. And again, there are differences here between Europe and America, on the one hand, and Asia and South America on the other.

Of course, people in Europe and North America do more planning in absolute terms, but much less than you might expect, given its importance and the easy availability of financial advice and products. According to our research, only one in every 100 Japanese, three in every 100 Chinese and Brazilians, one in 20 Indians, one in 16 Mexicans, and one in 14 French had been to see a financial advisor in the previous year. This compares with one in five in the UK, a third in the U.S., and, in Canada, 37 per cent. And, more than 70 per cent of the people polled worldwide had not read even one article on financial planning during the past year.

Trickiest Part
Planning doesn’t have to be difficult. For most people, the trickiest part is sitting down and envisioning their future; deciding what kind of lifestyle they want, whether they want to travel, how active they want to be, how much work they plan to do, what educational goals they have, and then talking to their partner, friends, and children to make sure that their desires are compatible with their wants and needs.

With that done, the financial steps are relatively easy to clarify. Employees should talk to a life planning expert or an independent financial advisor to identify how much they need to save and to find ways of saving that have the flexibility and interest rates they need.

Employees should talk to their employers to find out what their optionsare for a more flexible working life. More and more are seeking flexi-time so that they can exert more control over their working hours to fit in with other commitments and priorities. Doing some work from home can also be an option, which can help employees balance work and/or childcare. Some would like to take time out – it is not only academics who can take sabbaticals these days – and employers look on this with increasing favour, especially if they use the time to stretch themselves and acquire new skills. Those working past traditional retirement ages should be made aware of employer support for this and how their pension offerings fit changing lifestyles and a more ‘phased’ approach to retirement.

Ken Dychtwald is president and chief executive of Age Wave, a firm created to guide Fortune 500 companies and government groups in product/service development for baby boomers and mature adults.

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