Retirement? Age group 55 plus has a variety of choices!

Retirement seen as a defined, clearly demarcated lifestage may not be a true reflection of a social phenomenon anymore. A perceptual shift about what retirement means and should be has in fact already started in the 1960’s. These shifting currents of thought and perception about retirement are now gaining momentum.

As with all sociological phenomena, the reason for this is not simple and straightforward. It is the cumulative effect of a number of socio-economic drivers. The effect is multifaceted and spans generations. The main generations, which however appear to give overt expression to this attitudinal shift, are the Boomers and Generation Y.

In one sense the expression of change through Generation Y is simple to understand – it is part of an overall value system intrinsic to this generation. Defenders of the world, they always see themselves as contributing to the overall welfare of our planet. They are achievement oriented and starry-eyed entrepreneurs who do not question the existence of a world of limitless choice. To them it is a case of ‘I never have to retire’.

It is with the Boomers where a slow realisation and awakening is happening. They have inherited a retirement model from their parents. To many of them it is something which has been foisted upon them. The drivers of their attitude change to retirement are both functional and emotional. The economics of the 21^st century and financial needs are one and is a pragmatic response. The more interesting driver is an embracing of the concepts of choice and self-determination, especially amongst younger Boomers. Are their kids (Generation Y) teaching them something?

Boomers more and more are expressing a wish to continue work or being economically active or productive because they find it enjoyable, life affirming and a creative outlet. To many of them, retirement as a concept is becoming unacceptable. Age 55, 60 or 65 plus does not herald an end or final lifestage anymore, but merely a change in pace, a shifting of priorities, a realignment of personal goals: The word ‘retirement’ is becoming redundant. There is an attitudinal shift in perspective away from a cluster of meanings such as departure, withdrawal, extraction, the end of being a productive person, to a forward looking perspective. This forward looking perspective includes attitudes reflecting the onset or introduction of something new, the addition to what is current, and the verification and affirmation of who and what the person is and has achieved. For an increasing number of aged 55 plus individuals, attitudes about the rest of their life are evolving into something that represents the continuation of a journey.

How this scenario could evolve:

1960’s: Retirement re-conceptualised to ‘Active Living’

There is a significant increase over the past three decades in the share of elderly in the OECD countries’ populations.

Studies undertaken amongst Americans before the 1960’s revealed a lot of dissatisfaction with mandatory retirement. Del Webb Development Company (DEVCO) constructed a suburban housing development, namely Sun City, in the desert outside of Phoenix, Arizona, in 1959. They were leaders in the concept of this new form of housing and thereby articulated a new definition of retirement. More specifically, they re-conceptualised ideas about retirement through their advertising of the housing development at a time when more and more Americans were retiring and the traditional definition of retirement was seen to be largely negative.

Pension replacement rates in several OECD countries facilitate working for ten years longer by potentially increasing by more than 20 percentage points. Average retirement age is after the age of 65 in virtually all OECD Member countries. The RPD (retired-person dependency) ratio, i.e. the ratio of retirees to active population is 2:10.

1983: Public Pension Reforms – U.S.

United States starts process of reforms and phased changes that will be fully implemented by 2022. These include raising the standard entitlement age to public pensions from 65 to 67 and a notable reduction in implicit tax on continued work for ages 65 to 69. Main motivations for these reforms are cost containment and financial balance in the face of an ageing population with expected positive effects on work incentives.

1986: Public Pension Reforms – U.K.

United Kingdom reforms to old-age pension system start with a view to becoming fully effective by 2028.

1992: Public Pension Reforms – Germany and Italy

Germany and Italy start reforms to old-age pension systems, to be fully effective 2004 and 2035 respectively. Germany’s reforms however still include a disincentive to work after the age of 55.

1993: Public Pension Reforms – France

France’s reform to pension systems will be fully effective by 2008, however will still discourage working after the age of 60.

1994: Public Pension Reforms – Japan

Japan’s reform, which will be fully implemented in 2025, will reduce disincentives to work for ages 60 to 64.

1995: RPD ratio up from 2:10 to 3:10

A quarter of OECD Member countries now has an average retirement age of below 60. RPD is now 3:10 – three retirees for every ten persons in the labour force.

1998: More flexibility in retirement decision

OECD Economic Outlook reports a more fundamental change to public pension systems that has involved a stronger link between life-time contributions and pension benefits. This move towards contribution-based pension schemes is also accompanied by greater flexibility in the retirement decision.

2000: Tight job markets open up to seniors

President Bill Clinton signs the "Senior Citizens’ Freedom to Work Act of 2000" into public law. The impact this has is that older Americans who want to work after retirement are now free to do so without the threat of having their Social Security benefits reduced because of earnings capacity.

A tight job market requires employers to increasingly rely on older workers. A recent survey by the American Association of Retired Persons (AARP) showed that 80% of baby boomers say that they expect to work after retirement. About half of these surveyed will be working because they have no choice. The other half however will continue to work "simply because they want to. Missing the social experience of interacting with peers and colleagues and seeking personal fulfilment, they will stay active in the workforce".

A survey done by the Society for Human Resource Management indicates that 62% of respondents reported that they are currently hiring retired employees as consultants or temporary workers.

2001: Tax Relief for Baby Boomers

May 2001: In order to enable people to exert more control over their retirement destinies, the U.S. Congress passes sweeping pension reform legislation. It is enacted as part of a large tax cut package entitled Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA).

A Baby Boomer survey by Del Webb Corporation reveals that the leading edge of this generation believes that retirement is only a mid-life event. These 55-year olds say they want more challenging ‘retirements’ where they continue to work, start new businesses, increase their knowledge and establish new goals. They put a priority on being debt-free and want lots of disposable income.

2002: Life-long learning and back to work

OECD Member countries aim to increase labour participation of older workers. As part of this effort, some countries have taken measures to support training of older workers and to raise incentives for life-long learning.

October 2002: Taylor Nelson Sofres survey of 777 over-50’s finds that 22% were retired but had returned to some form of work. Of those aged 65 to 74, 34% were back at work.

2003: Phased retirement and new product innovations

Jim Parkel, president of AARP, a large U.S. nonprofit membership organisation that provides services, information and advocacy for age 50 and older people, states that a new phenomenon is the changing nature of work and the need to redefine the words ‘retirement’ and ‘work’.

Parkel, in focussing on emerging workplace issues that effect private-sector employees, is instrumental in addressing pension-related roadblocks that prevent employees from testing forms of phased retirement.

He also states that many seniors over age 65 also do not need a benefit package but do need other services and products such as ‘top-notch’ health care and skills-enhancement facilities.

2005: Anti-Ageism

Ageism is the new social no-no of the day. Society in the 21^st Century has vociferously campaigned against racism, sexism and a variety of other –isms. ROPA, the Royal Ordnance Pensioners Association has campaigned for and been influential in the passing of legislation to outlaw age discrimination.

2006: Boomers save the day

Number of workers age 34 and younger dips to 36% in the U.S. workforce. Peripatetic hotshot Generation X is not the answer to companies’ consistency and competitive needs. As a result of companies attempting to keep pace with competitors, they are increasingly tapping into the older, qualified but often retired, Boomer generation. Fortunately for employers, the concept of retirement has changed as quickly as the composition of their workforce.

2010: RPD ratio on downward trend

Ageing populations in OECD Member countries result in significant decreases in the RPD ratio. It was threatening to reach levels of 4:10 and would have reached levels of 6:10 by 2050 if mid-1990’s labour participation rates continued. The current levels of 3:10 bode well for an overall longterm decline and RPD ratio projections for 2020 are now 2:10, i.e. back to levels achieved in the 1960’s.

Towards a Segmentation Matrix of the future age 55 plus market

Retirement? Age group 55 plus has a variety of choices!