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Is Retirement Dead?
25 August 2013
By 2030, the average Australian life expectancy is anticipated to be 84.5 and 87.8 for men and women respectively. While the over 65 age group represented 14% of the population in 2011, the Australian Bureau of Statistics estimates this will be around 24% in 2056.
One important implication of this trend is the retirement savings gap, where there is a shortfall in sufficient savings to enable a comfortable retirement.
Not only are we living longer. Generally, we are living healthier for longer. In addition to the retirement savings gap, there is a growing ‘retirement time gap’ where people can expect to enjoy relatively good health for an extended period beyond 65.
Many of the leading edge Baby Boomer generation - those now aged 60 or more - reject the traditional notion of retirement. They want to continue to be engaged with the world, to use their hard won skills and experience in productive ways, and to have the option to earn extra income.
Increasingly for these people, traditional retirement – the gold watch at 65, playing golf and tending the garden – is seen as akin to living death. As Phil Ruthven, founder of IBISWorld has said, “Who would want to be retired for 30 years?”
It is noteworthy that growing numbers of older workers say they will never retire. The most recent Australian Bureau of Statistics (ABS) Survey of Retirement and Retirement Intentions shows that 13.3% of people aged 45 and over say they intend never to retire.
The ‘Encore Career’
New technologies have revolutionised communications. Businesses and individuals are delivering services and interacting via the virtual world. Fast broadband and devices such as smart phones and tablets, are increasing access to information and enabling greater work flexibility. Teleworking is growing. We are not as constrained as we once were by time and place. Flexibility is the great enabler.
Regus, the international provider of flexible and virtual work locations and services, refers to “third place” locations as a significant avenue for growth. While the office and the home are seen as first and second places respectively, Regus defines the third place as being anywhere else, for example, a café, a park or a railway station.
We only have to look around us to see examples of this trend. Hotel lobbies, cafes and other public spaces are frequently used for business meetings, to check emails and access news services and other information.
Longer life expectancy, greater health in later life, and technology advances are creating a broader range of options than ever before. Work locations can be anywhere we like. The internet, ready access to information and the dramatic growth of online businesses are changing our lives. Meanwhile, starting a business, and reaching potential clients has never been easier.
Those leading edge Baby Boomers who reject the traditional retirement models are taking advantage of these factors to create encore careers.
What is an Encore Career?
Marc Freeman, CEO and founder of Encore.org is credited with coining the term encore career in the USA. The New York Times has described him as “the voice of aging baby boomers who are eschewing retirement for … meaningful and sustaining work later in life.” The Encore.org website states that encore careers combine personal fulfillment, social impact and continued income, enabling people to put their passion to work for the greater good.
Encore.org refers to a recent study that indicates that up to 9 million people aged 44 to 70 in the USA have already chosen encore careers, with many more millions planning to do so in coming years.
While in the USA there has been a greater focus on the social good, and leaving the world a better place, a broader concept of encore careers is gaining popularity in Australia. This encompasses a flexible approach where paid employment or self employment, whether part or full time, is a significant part of the equation.
ABS and other research show that there are quite different motivators expressed by high income and low income Baby Boomers concerning their later year careers or retirement plans.
High income Boomers are more likely to embrace a change of career, or career reinvention, which may include paid work, income from private business activities, pro bono work and mentoring of younger people. Low income Boomers are more likely to perceive they will have to continue to work beyond retirement age purely for financial reasons. Their choices are much more constrained by necessity.
While the term encore career is not yet in common use in Australia, many older people are now engaged in one, whether they know it or not. From my own experience and observation, often those individuals who have a choice, continue some involvement in their former field of work on a part time basis. Along with this, they spend more time on developing their knowledge and skills to better manage their finances (they frequently have self managed super funds), and doing voluntary work in areas they wish to support including the arts, charitable organisations and local community groups.
How do people make this transition to an encore career? As the great racehorse trainer Colin Hayes was fond of saying “The future belongs to those who plan for it.”
There is no roadmap or well worn path to planning later careers, and it tends to be a very individual process. While some make a seamless transition, others struggle, especially in the early years. A small number get professional advice to help clarify their goals and to map out a plan.
While traditional retirement is far from dead, there is a clear trend towards older people delaying retirement and working for longer. Whether this is from financial necessity or choice, there are significant implications, not only for these individuals themselves, but for policy makers, service providers and businesses. The leading edge Baby Boomers are a large group and the numbers following them are even greater.
Those organizations that recognize the changing landscape and develop quality targeted services will benefit. Providers of financial services are one such area.