9 November 2004
How is retirement changing?
A keynote speech by Retirement Commissioner, Diana Crossan The Tower Lectures
Introduction When I was first offered this role I confess to being perplexed with the title “retirement commissioner”. Firstly, the title didn’t really seem to fit with the job – which is to help people make better financial decisions throughout their lives in preparation for when they leave fulltime employment. There are many other aspects of retirement that the role does not cover. But secondly, “retirement” didn’t fit with my perception of what people were now doing with their lives post-fulltime employment. It seemed to me that as people reached their 60s (and earlier) they were beginning to exercise more choice over their work patterns and their leisure. They start thinking about how to change their balance from work/life to work/leisure. The whole concept of retirement is changing. The unifying theme of the change seems to be continuing to use ones talents to work in things one enjoys – a time of flexibility, creativity – the kids have left home, it’s a time for trying new jobs, new ways of working. Yet many other people are also still retiring in the traditional sense. In fact, I recall at a bar-b-que recently, a group of people in Nelson in their 50s were positively looking forward to stopping work at 65, looking after the grand-children, and playing bowls.
Summary This mixed bag suggests we are in the middle of a major social transformation – the creation of an entirely new way of thinking about how we live our lives – especially the second half of it. And in that lifetime, the notion of a point we call “retirement” which permanently divides work life from leisure, is simply no longer universally practised. So I intend to use this speech to talk about a new life stage that is emerging in New Zealand, and the UK if my discussions last week are anything to go on. I will show how the way people live has changed so dramatically over the past decade that the existing concept of retirement has changed.
Facts Many things have been changing to create a significant transformation in the social structure of New Zealand, most notably demographics. New Zealand had some of the most impressive baby boom growth in the world following the second world war and these people are fast heading for retirement. Some will think the Economist magazine recently summed up the situation when it said;
“a larger generation of old folk than ever before will need support for longer than ever before from a population of working age that is shrinking continuously in absolute size for the first time since the Black Death”.
(That’s melodramatic for sure, but largely true. For fewer than half of workers in the OECD aged 55-64 are actually employed.) In New Zealand, Statistics New Zealand says that by the middle of this century, one in four New Zealanders will be aged 65 or older, compared with one in eight today. At the moment, only 7% of women and 17% of men are continuing in some form of employment when they reach 65 – 85 year figures 6% men 2% women. These numbers are likely to grow. For example, Tomorrow’s Workforce Today, a report from the Department of Labour, found that those over 55 accounted for almost half the job growth in the past two years. Their work is different to the working-age “norm” though. Joseph Quinn of Boston College found that half of Americans retire in stages, taking what he calls “bridge” jobs on the way. These are often part-time or self-employed. They offer flexibility while cushioning the fall in income. I think Joseph Boston and those writing about the changes for this group of people from 55-70 have got it wrong in one aspect. While he says they retire in stages, I think there is another way to look at it. I think the change is being driven by people over 50 simply trying to find a better life balance, rather than consciously bridging their way to retirement. I’ll talk more in a moment about how it is this baby boomer generation that is really driving the change away from traditional retirement.
Our education, health and sheer numbers have made a difference.
Education Thanks to post-war investment in schooling, the baby-boom generation is particularly well educated. It turns out that a qualification is a good predictor of who will continue employment after 65. It is also an indicator of the sorts of work people over 65 are more likely to do.
Health Another major change is that due to health care and healthy living awareness, people are living longer. As the baby boom generation begins to retire, we are more demanding of life – of ourselves and of the system, we are healthier.
According to Statistics New Zealand , a girl born in 2002 can expect to live on average 81.1 years, and a newborn boy 76.3 years. If they had been born only ten years earlier they would have had a life expectancy 2.4 years and 3.5 years shorter. So women are living 15-20 years past the age people traditionally expect to stop work. Men are living 10-15 years past their traditional retirement age.
Sheer Numbers They need a means of financial support during that period. A group of people over 65 that is double the current size, and living many years longer than previously, will cost the Government/tax payer increased amounts in superannuation, state health care and welfare. Government planners also worry that productivity growth is not sufficient to ensure that the smaller numbers of people in the workforce will be able to support this group. That could act as a financial pressure for older workers to continue working, full time or part time. In France, the government has made it clear they expect people to work longer. Parts of Scandinavia have an increasing age for their pension. Fortunately, healthier aging means people will be physically able to continue work.
Retirement Age And we should not forget that although New Zealanders are entitled to superannuation at 65, there is no compulsory retirement age in New Zealand. I think this has made a huge difference to our attitude and culture around stopping work. I am keen that someone do some further research on the affects of this major change.
Employers Changing All of this is fine as long as an economy is performing strongly. The current labour shortage has undoubtedly contributed to preparedness for employers to take older workers. The risk is that the change has only been driven by external pressures, not a real appreciation of the value of older workers. So any downturn could well reduce the employment of those over 55. Compounded by the financial realities of longer life, that could create a large economic crisis as the state struggles to cope with supporting unemployed elderly. But I like to think that this current period of high employment will establish a long-lived pattern of hiring older workers. Just as equal opportunity ensured employers discovered that female employees were actually very good at their jobs, so employers are about to find that older employees ought to be actively recruited. Employers keen to attract the experience and skills of older employees will need to change their work places and working conditions.
We might have a chance of seeing the end of youth-biased recruitment advertising words like “energy” and their replacement with words like “experience”. Also, they will need to make it possible for staff to work variable, shorter and more flexible hours. Work places which acknowledge the demands of older workers and give them choices will recruit the best. The information-based nature of work combined with growing skill and education levels means a lot of work can be continued into older age. It is not all straight-forward for all sectors. For example, we have a generation of people affected by the economic rationalisation of the 80s and early 90s. For an uncomfortable number, stable long term employment ceased – particularly large groups of Pacific Island and Maori men in freezing works and factories. Some of these people have been forcibly “retired” since they were in their late 40s. Disaffected with their lot in life, are now entering a period where they are expected to be retiring from work they never, or rarely, had.
***** Attitude For the most part however, the baby boom generation, has a different attitude. After a lifetime of reconstructing social norms, the baby boom generation (born between 1945 and 1964 - the only two decades since the 1890s when New Zealand’s fertility rate increased) is now setting about redefining the traditional sense of what life is like past 50. We are now demanding – of ourselves and of the system. While what gives us purpose and meaning changes throughout life it also changes through generations. Many people are working out for themselves that they don’t need to stop work. They are negotiating with employers for flexibility. They are working out for themselves how much more money they will need for the lifestyle they desire in older age. They are upskilling themselves to work in jobs they want, and to remain attractive to employers, or to move into other lines of work. They are attempting to become financially literate and find other ways besides their labour that they can earn income.
***** While some parts of society are still working as before up to the date of their retirement and then stopping work entirely; I think there has been a big change. That is why I am advocating a change to our current concept of retirement. Retirement will not go entirely. There is still a time when most people will stop all formalised work – it now seems nearer to 70. Even though we may still call that retirement.
My focus is on the period between 55 and 70. After all, the oldest baby-boomer is 59 this year. This is where the most change is taking place. One of the most revealing measures of this change is the emergence of a self-help and self-fulfilment culture to match those these baby-boomer created in their earlier years.
Out of nowhere has arisen a business in retirement lifestyle and guide books. These range from the ‘chicken soup’ style of titles such as It’s never too late to plant a tree: your guide to never retiring, and ‘what colour is your parachute’ guides such as Looking forward: an optimist’s guide to retirement. Other titles include: Living well in retirement, Too young to retire: 101 ways to start the rest of your life, How to retire happy, wild, and free: retirement wisdom that you won’t get from your financial advisor, Don’t Sweat guide to retirement: enjoying your new lifestyle to the fullest Around half of New Zealanders over 60 have access to the Internet. A wealth of virtual communities are springing up there, such as www.2young2retire.com, www.retirementwithapurpose.com and www.retirementliving.com. Senior Net continues to grow – as demand drives them to offer more and more courses. The Retirement Commission partnered with them recently to use our 60plus financial information as an attraction to first time internet learners. The rise and rise of the power, wealth and expectations of the older generation can also be tracked in the provision of accommodation for them. The number and diversity of retirement villages has exploded. A particular feature is the emphasis on choice and independence – a hallmark of the expectation of upcoming generations.
Conclusion While I talk of a change in this stage of life some are saying things are changing at all stages. I don’t know whether all I have spoken of today represents a transition to a new paradigm, or we are already in an era of new experience for those 50 plus. But it is definitely a transformation from what we knew. People have been aware of the growth of a stage in life between work and “retirement” – they called it a transition, or phase - phases. But it is wrong to call a period in life that could stretch 20 years – from say 50 to 70 – a transition.
It’s a period in its own right. This is a time of life that requires a new name – to ensure we change the way we think about this stage of life. We have to change our thinking because: If we think of 60 plus as retirement from work people will not be ready for the reality that we may financially need to continue to work. And if we don’t appreciate that most of us are likely to be alive for quite some time past 60, we won’t save enough now to realise our ambitions for that time. So I propose that as a first step to understanding the changing paradigm of this period in life, and preparing for it ourselves, we change the way we refer to it. We need a new word for it. We currently tend to define life stages by age and / or what people are doing. We go from being a baby, to toddler, to child and student, to a working age adult (or parent). After that it is thought that we retire – we stop working.
The idea of traditional retirement is probably still alive in some sectors and may be even some regions, but for a growing group I suspect it has shifted out to the very late part of life. I would like to suggest that there are new factors prevalent in many people’s experience of the time between 55 and 70. These are things like; choice, freedom, fulfilment, work, leisure, and spirit. It seems to me to be a time of life which stands on its own two feet – it is not a transition between more important stages of life. It is a time when we get to bloom, to pursue goals by choice, and to have a good chance of achieving a fulfilling and balanced life. We are in the middle of the creation of a new social structure. We are creating a period of life which has yet to be named. Others have been here before me.
They’ve created terms such as “3rd age”, “downshifting”, and “phased” or “semi” retirement. Other possibilities for naming this period include “choice-work”, “workplus”, and “50 Plus”. Demographic, lifestyle, and attitude changes have all contributed to changing what retirement means to New Zealanders. The task now is to find a name that fits this new way of thinking and being.