The 100 Year Life: Plan for it, because it’s coming, and it’s here to stay – for a long time
Are you ready to live to 100 years old?
This was the subject of my presentation to Business in the Community Northern Ireland, as part of their “Age in the Workplace’ initiative.
A study recently published in the Lancet highlights optimistic projections for a rise in life expectancy in many industrialised countries.
According to the team of researchers, British women born in 2030 can expect to live to 85.3 years old, and British men born in 2030 can expect to live to 82.5. British women who will be 65 in 2030 can expect to live to be 88, and British men who will be 65 in 2030, to 86. As for the Irish, men and women born in 2030 could reach an average age of 84 and 87 respectively. In Ireland the current life expectancy is at 78 years for men and 83 for women.
As project leader Majid Ezzati said, we once thought there was a sort of natural lifespan, and that life expectancy beyond 90 was an impossibility. But he’s changed his mind: “I don’t believe we are anywhere near the upper limit of life expectancy – if there even is one,” he said.
Populations around the world are ageing, and we have known about this phenomenon for quite some time already. However, it is usually talked about in terms of hand-wringing over insufficient personal pension provisions, near-bankrupt state pension provisions and increased healthcare costs for the diseases and disabilities of old age.
But two professors from the London Business School, Lynda Gratton and Andrew Scott, argue in their book (published June 2016) that living to be 100 is something we should be looking forward to – and definitely should be planning for.
I’m in full agreement! There are so many things we can do with those extra years: rounding our skillset, investing our experience in new ideas, having more time with loved ones, travelling to new places… The hundred-year life also represents an immense opportunity for businesses, both to create new products and services by really thinking through the consequences of the 100 year life, as well as selling more of their existing products to their existing customers for longer.
So, what’s your hundred-year plan?
Pensions, pensions, pensions
The first concern of course revolves around pensions. Governments are struggling to continue to provide the same level of state pension and many are proposing to raise official retirement age, or have already done so. In the UK, the official state pension age will rise to 66 between 2018 and 2020, to 67 between 2026 and 2028, and then to 68 between 2044 and 2046. People who are in their 20s today might not retire before they are 70.
Mind the Gap, a Deloitte report commissioned by Aviva, shows that the pension savings gap is growing: “across Europe as a whole the annual pension savings gap has now topped 2 trillion euros.”
This pension savings gap is the amount people need to save each year, to compensate the difference between the amount of state pension they will receive if they retire between 2017 and 2057, and the amount of money you need for an adequate standard of living: “For example in Ireland the average 30 year old needs to save an extra €5,100 a year and a 50 year old an extra €9,700 a year.”
The report estimates this savings gap as €365bn for the UK, and €28bn for Ireland, and makes it clear that raising retirement age would be one straightforward way of reducing that gap without placing an additional burden on state finances. In fact, raising retirement age by 10 years would almost halve it.
As Lynda Gratton and Andrew Scott highlight in The 100-Year Life, “if you save 10% of your income and expect to retire with 50% of your working income, you will need to work into your 80s.”
So if you need to work longer, and you also need to save more in order to have a comfortable retirement, you would do well to take pension provisions in your own hands. (read more about pension provisions and why women need to stop sabotaging their future).
First, calculate your state pension and see what personal savings gap you need to fill. You can do this via the Pensions Authority calculator in Ireland and this pensions calculator in the UK.You will need to set better financial goals, and also be aware of what returns you can expect on pension savings in a context of low interest rates.
What else can you do?
I am personally doing three key things and I would suggest you consider them also:
1. Really think about what you enjoy doing and how this can translate into workplace skills and advantage.
Ask yourself: “if I retired tomorrow, how would I choose to spend my time?” Craft a job description accordingly and brainstorm ways this might be possible. I’ve been doing this since the very beginning of my career and it has served me very well thus far. This makes good sense anyway, but if you’re going to be working for a decade longer than you might have previously thought, then it becomes even more important.
2. You can also think about additional income streams, especially from assets that you can leverage thanks to the sharing economy.
3. It’s crucial that you keep your skills up to date.
A generation ago, one might have studied for a degree and there wouldn’t have been any need for formal education for years and years thereafter. This is no longer the case. I take a formal course each year and pursue informal online learning every month to ensure relevancy.
The effects of an ageing population on the financial markets
Of course, the effects of ageing will have far-reaching impacts on financial markets. Ageing societies will usher in an era of saving, which should provide a tailwind for companies that help people plan, invest and save for retirement.
Fixed income and dividend-paying equities will probably benefit in this environment given both asset classes provide a regular income for retirees to use.
Additionally, the structural demand for longer-dated bonds from insurers and pension funds may limit the extent to which bond yields can rise in the future.
Older people enjoy work and don’t always long to retire
Older people are enjoying more active lives and choosing to work longer not always out of necessity, but simply because they can’t imagine retiring just yet. They’re having too much fun.
In the UK, the DRA, the Default Retirement Age, was scrapped in 2011, which means that employers cannot issue employees with forced retirement notices. This was hailed as a positive move by Age UK, a charity and advocacy group, who campaigned for its abolition. According to Age UK, “The DRA gave older workers second-class employment rights and takes away their freedom to plan for retirement at a time when they need it most. Forcing people in later life out of the labour market when they want to work, save for their pensions and pay taxes is nonsense and it makes a mockery of the government’s attempts to extend working lives.”
This is a crucial social change: our perception of work as a “sentence” to be endured is changing. The idea that you have to grit your teeth through 40 years of a boring job, and wait until retirement to enjoy yourself, has less and less currency.
Especially if we are going to be working into our 70s and perhaps even our 80s, we need to create the conditions in which we love what we do because we do what we love. Then doing it won’t feel like a life sentence. Of course, interests change and the market demands different specialisms, so this requires dynamism on the part of the individual, both in terms of self-awareness as well as action to reflect that.
Lifelong learning: let go of the idea that age = stage
In 2014, numbers highlighted by UK skills minister Matthew Hancock showed that “more than 34,000 people aged over 50 have started an apprenticeship, with more than a third of them finding jobs in business, administration and law.”
In the above mentioned Irish Times article, there was one common point in all the profiles of these successful, enthusiastic people still enjoying work after 60: retraining.
This corroborates what Lynda Gratton and Andrew Scott say in their book: the idea that there are definite, rigid life stages corresponding to a certain age number will soon be outdated. “If you now work into your 70s or 80s in a rapidly changing job market, then maintaining productivity is no longer about brushing up on knowledge it is about setting time aside to make fundamental investments in re-learning and re-skilling.”
It used to be that, from your birth to your early 20s, you were in education. Then you worked, from your 20s until your (late) 60s. Then you retired. But the world of work is changing. With new technologies and innovations, employees are embracing lifelong learning and a more fluid career path. To keep up with the rate of innovation and to secure a long working future, we will all need to have not just a pension plan, but an education plan in place as well.
Fortunately the world of education and CPD is changing, too: it is now possible to fit continued education into your already busy life thanks to quality online learning. And the ageing of the workforce will be a wonderful boon to companies: experienced employees who don’t want to retire can become coaches or mentors. This is a win-win arrangement, as older employees’ own lifelong learning needs can benefit from reverse mentoring.
Hopefully this will lead to more flexibility and empathy: if age doesn’t equal stage, then a young worker isn’t necessarily naïve and clumsy, and an older worker isn’t necessarily outdated. This will be a more fluid world where each person’s merits will be appreciated for themselves, and not rigidly linked to the age of the person.
The “Silver economy” as a business opportunity – for the over 50s, too
Such initiatives show the need to think in terms of innovation and initiative: longer lives are also a business opportunity, for companies catering to older people, and for older people themselves. I have written about this on the blog before, and more recent research points to the continuation and growth of the opportunity. A Bank of America Merrill Lynch report from 2014 estimates the silver economy at $15trillion by 2020. According to this report, in the UK, households headed by someone aged 50+ have a net worth averaging £541,000.
On the side of companies who have older people as customers, we have seen how private pension providers will need to make sure they address the concerns of this demographic with investment vehicles like longer-dated bonds. Nursing and retirement homes as well as private home care providers will of course see an uptick in demand. But that’s not all: career change coaching for the over 50s and education providers also stand to benefit from the trend. Employers and coworkers will need to wake up to this potential if they haven’t already done so.
However, perhaps “adapting” to this older demographic will be easier than we think, since more and more entrepreneurs and employees will be over 50 themselves – they will know how to talk to this demographic because they are part of it. They will be the best placed to advise companies who need to overhaul their marketing strategy to reflect the ageing of the population.
Initiatives such as ISAX’s “mature entrepreneur” programme through their Ingenuity scheme are also bound to flourish. Ireland Smart Ageing Exchange is a network of businesses highlighting opportunities for over 50s, in several ways: for companies whose clients are the over 50s, but also for the over 50s themselves. With members and partners running the gamut from Nestlé and IBM to Dublin City Council, Enterprise Ireland and IDA Ireland, you can see how important players are taking the smart ageing economy very seriously – and we, businesses and citizens young and old, would do well to pay attention.
As we get ready for our own 100-year life, there are many steps we can take to make it pleasant and productive as late as possible.
Ironically, we will need to do the kind of things that many people prefer to leave until later: eat healthy, exercise, research pension schemes and investments, career changes, etc. We will have to take care of the “boring” but ultimately essential things that will guarantee a better, more prosperous and comfortable old age.
Increasingly, older age will not be a quiet, passive period in which we reminisce about our younger, more energetic years – and this is another ageist stereotype that will need to go.
To finish on a quote that I love: “Never give up on a dream because of the time it will take; for the time will pass anyway.” – and it seems there will be plenty of it!
Are you on the list?