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Inflation in OECD countries reached 10.3% in the three months to August 2022. In many countries, it has reached a 40-year high, which is having a significant impact in how people save for and live in retirement.
We need to re-examine our attitudes to work and retirement and our journey from one to the other.
A generation ago, many people enjoyed a defined benefit pension plan, where they knew how much they would receive from their employer during the rest of their lives. Today, these plans have been largely replaced by defined contribution plans, where individuals shoulder more responsibility for ensuring that their retirement savings will last for the rest of their lives. In 2019, the Aegon Center for Longevity and Retirement conducted a survey in 15 countries where they found that the second largest retirement concern held by workers was running out of money.
Source: Aegon Retirement Readiness Survey 2019
Retirees and those nearing retirement see inflation eating away at the purchasing power of their retirement savings. They have fewer options compared with younger workers, who may be able to save a little more over a longer timeframe, extend their working lives, or ride out the times of economic uncertainty we are currently experiencing.
Collectively, we need to develop solutions that help people achieve financial security throughout their lives. We are living longer, healthier lives; the formula based on a full retirement in our mid-sixties and a life expectancy in our seventies is no longer fit for purpose. We need to re-examine our attitudes to work and retirement and our journey from one to the other.
More on the Forum Network: Why It's Become Crucial for Older Adults to Learn New Technology by Lawrence Kosick, Co-Founder, GetSetUp
In societies where the older adult population is steadily increasing, so is the digital divide. However, technology can help many aspects of their lives including finding a job, avoiding loneliness and getting the proper care. Bridging this gap is necessary to change their lives for the better.
Our work shows that 56% of employees want to continue working beyond age 65, BUT 65% of employers are encouraging retirement at legal age or before.
Most people envision a phased approach to retirement, where they continue to work in some capacity past traditional retirement age compared to the cliff-edge approach we had in the past. Offering people opportunities to stay economically active and engaged is clearly wanted. It provides older workers a valuable opportunity to continue earning and delay drawing down on their retirement savings, which is a big benefit in times of economic uncertainty.
Research conducted by ProAge and 55/Redefined in the United Kingdom found a disturbing disconnect that offers an improvement opportunity for both individuals and the companies they work for. Our work shows that 56% of employees want to continue working beyond age 65, BUT 65% of employers are encouraging retirement at legal age or before.
Currently, the United Kingdom is facing a labour shortage in many sectors, and the Chairman of the Confederation of British Industry recently called for a relaxation of immigration policies to help businesses find the resources they need and stimulate economic growth. But are we not missing an opportunity if we do not also look at ways to tackle underemployment among older workers that would allow them the opportunities to continue earning and saving for their retirement?
The Office of National Statistics in the United Kingdom recently reported that, in the period July to September of this year, there were almost 3.6 million economically inactive people aged between 50 and 64. This represents 27.3% of the people in that age category: more than double the percentage of economically inactive people in the 25 to 34 and 35 to 49 categories. To put the figure in greater perspective, the number of economically inactive people 50 to 64 is more than the total number of economically inactive people aged 25 to 49.
We need to find opportunities for older workers to continue working. To do this, we first need to help companies foster more age-inclusive workplaces where older workers have access to quality jobs; receive the skills and training they need to succeed; and where workers of all ages are recognised for their contribution.
If older workers can make the choices that are right for them, people of all ages can thrive.
Finding ways to help people aged 50 to 64 become economically active again is a win for everyone. Governments can increase their tax base though income tax while at the same time reduce the amount of benefits they pay. Companies have access to a talented group of employees with a history of lower staff turnover and the opportunity to build high-performing, multigenerational teams. Individuals have the choices they need to plan when and how they transition to retirement, offering them more control to continue earning and make their retirement savings last longer.
The first step in making this happen is to develop more age-inclusive labour practices: if older workers can make the choices that are right for them, people of all ages can thrive.
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I am intrigued as to why the upper age limit stated is 64 when one can't claim the state pension until at least 66 in the UK? But as the graphic above demonstrates the key issue is perhaps people in their 50's, who have felt forced out of the workplace, have years of economic inactivity ahead of them and miss out on the important role of accumulating savings or pension pre-retirement.