RETIREMENT... A THING OF THE PAST?

It wasn’t all that long ago when retirement from the work force was automatic at age 60. Indeed, it wasn’t uncommon for people to take early retirement at 55 and go off into the sunset to garden, play golf, go fishing, travel and slip into a life of leisure, supported in no small part by a very generous (and expected by right) Superannuation Scheme linked to the average wage index, with inflation adjustment.

In the seventies, eighties and nineties we all heard the expert’s predictions of shorter working hours, greater leisure time and earlier retirement! The reality is however quite the opposite. In the new millennium the days when people reach age 60 and stop working one day and enter retirement the next are gone forever.

Some of this has to do with the progressive raising of the age and eligibility for the National Superannuation to 65. However, I would suggest that there is also a major change in attitude and mindset to be considered, and, more importantly consideration to the way in which the world of work is now structured.

The question is whether in fact people will actually “retire” at all in the future?....many may never be in a position to afford so called “Retirement”.

For those of us from the “Baby Boom” era and subsequent generations, I believe that age will become irrelevant in the scheme of things. And while people may wind down the intensity, the level of and/or the nature of their involvement in business or work activities (assuming lesser roles or doing work of quite a different nature), work interests will continue to occupy us in some remunerative form until either, we physically or mentally cannot work, or we simply die.

There are many reasons why this is likely to occur – primary amongst these and the obvious one is the progressive reduction of Government Superannuation and the need to supplement income. Other reasons that come to mind however are the necessity to compensate for negligent or nil saving practices throughout earlier working years – the need to sustain increasingly higher living standards and expectations, or to fund a lifestyle considered appropriate. People now marry later in life and frequently do not start a family until the age of mid 30’s or even early 40’s, (if indeed they choose to have a family at all) therefore they have dependent families on their hands later in life and for much longer than was previously the case. Younger people are finding it more economical and convenient to live with or otherwise have an ongoing need to be supported by their parents due to such things as increased tertiary education costs, entry level housing prices etc. Significantly, many of the Baby Boomers are now into their second or third (or more) marriages or partnerships, starting all over again mid-life, sometimes from a scratch position which in turn frequently impacts significantly on their financial position in later life. Also, changing lifestyles and health patterns indicate that people are fitter and younger for their years than they were 30-40 years ago – modern medicine, attention to diet and exercise, participation in sports to greater ages (witness the growth of the “Golden Oldies”/”Veterans” movements and “Multi Sports” phenomena) just to mention a few.

All of these and many other factors lead me to the conclusion that: retirement is a state of mind, not a condition. All things being equal, we know that performance in a job bears little relevance to a person’s age (physical and health limitations accepted) and that people also need both the structure and the therapy of work to stimulate and challenge them in addition of course, to the all important financial aspects of the equation. The interesting thing about all of this is, that we only need to look at some of our trading partners, particularly in the Asian Pacific region, to note that the heads (or figureheads) of many companies are actually in their 70’s or even 80’s. With this in mind, our aging population is pretty much in step with trends in other countries around the world (particularly those in the OECD) where the average age of both the population at large and also the work force is climbing as the baby boom generations mature.

Another key issue relates to the rapidly increasing and predicted ongoing shortages in both the skilled and unskilled labour markets and the lack of numbers of younger people to fill the available jobs. The decreasing birth rates which have now occurred over many years, means that we are now not at population replacement levels in New Zealand. This in turn means that more and more employers will, through necessity, develop schemes and provide incentives to encourage “traditional retiring age” people to remain in the workforce for much longer.

One of the major questions I have is: Are the huge sums of money being touted by many of today’s financial planners as being absolutely necessary in order for a person to be able to retire comfortably really necessary? Certainly one needs to consider the possibility that perhaps 30% or more of the average life savings planned for retirement will likely be gobbled up by health care needs. Realistically however, our monetary requirements should lessen as a person ages, compared to other stages in life, – but that’s another story!

A sobering thought though as we touch on the aging demographics in New Zealand, is that from around the year 2020 on, it is projected that approximately 30% of the population in New Zealand who are in work will be supporting the other 70% through their taxes!!

Reverse mortgages are almost certainly poised to “rocket” as asset rich, but cash poor Baby Boomers strive to maintain the lifestyles which until now most of us have taken for granted.

There is also the distinct possibility that future generations may well not inherit the degree of wealth they might expect from their parents, some may even inherit debt!!

At the end of the day – do you retire to create and enjoy a new way of life …… or do you retire to die?

Barry T Knight