We’ve heard a lot lately about how the Covid-19 pandemic is dramatically disrupting the retirement preparations of tens of millions of working Americans. Being furloughed from work or having your small business fail is causing people to dip into savings and interrupts putting money aside toward retirement. Those closest to retiring can be in the biggest bind, and many are choosing to delay retirement to fill their growing financial gap.
But how is the pandemic affecting folks who are already retired – or even the lifestage of retirement itself?
The short answer is that Covid-19 clearly poses a major threat to the health of older people, and it has disrupted the lives and activities of retirees just like everyone else. It’s almost as though the entire world has had a collective near-death experience – with everyone realizing that a part of their life has died, and they themselves, or their loved ones, may be at higher risk than they were a few short months ago.
However, as backdrop to this disrupting pandemic, retirement was already undergoing an enormous transformation before the coronavirus struck, and it’s continuing today. This transformation is driven by the aging Baby Boomers, who have been retiring at the rate of about 10,000 a day for more than five years. Several seismic forces are at play – medical, demographic, economic, and social.
Life is longer – and longer. The life expectancy of Americans increased by 64% in the last century (from 47 to 77) and continues to rise, with some trend-watchers speculating that due to coming breakthroughs in exponential medicine, half of the kids born today will live to see their 150th birthdays. Driven by the longevity revolution, the timing and character of aging continues to evolve fast. What does it mean to be “old” today? And when does that happen? 65? 75? 85?
The age wave is here. The post-World War II baby boom had 76 million births in the United States between 1946 and 1964. The baby boom became a teenager boom in the ’60s and ’70s, then a labor force boom, including unprecedented numbers of women, and now a retirement boom. Today there are already 68 million retirees in America. That’s over 20% of the population. Twenty years from now, the ranks of U.S. retirees will swell to 82 million. At that time, the world will have nearly two billion people over the age of 60.
Who’s got the money? These growing numbers will further increase the already mighty economic power of older Americans. Men and women over age 50 currently represent 44% of all adults yet control 76% of household wealth, a total of over $80 trillion. They account for well over half of all consumer spending, including in some expected categories: two-thirds of health care expenditures, three-fourths of charitable donations, and 55% of travel and lodging spending. But they also do over half the total spending on major appliances, new cars and trucks, jewelry and women’s apparel, personal care products, and even groceries. Enterprises ignore this economic clout (often in pursuit of the Covid-19-battered youth market) at their peril.
Not your grandparents’ retirement. Driven by strength of numbers, willingness to experiment, and commitment to causes including civil, women’s, and gay rights, the Boomers have reoriented American society at each stage of life through which they’ve migrated. They have watched their grandparents and parents try to make sense of what to do in retirement, where to live, and what’s the point of longevity. Now, true to form, they want to retire differently. They want more action and excitement, and they enjoy more choices in lifestyle, location, leisure, and other realms. Rather than winding down, they want to reinvent themselves. As they steadily replace the older and more staid generation of retirees, the entire lifescape of retirement will change in every conceivable way.
What is Covid-19 telling us about the state of retirement today? Here are three lessons.
First, retirees enjoy many advantages. We can’t overestimate the value of a secure retirement, which many are experiencing, especially during these turbulent times. Secure not only in terms of finances, but also in access to health care and housing, and in retirees’ honed-over-a-lifetime resilience. Yes, older people are more vulnerable to the coronavirus. But beyond that they have numerous basic advantages, starting with income from Social Security and health coverage through Medicare. Nearly half of all American retirees own their homes, mortgage free. And they have the experience, perspective, and emotional maturity to weather difficult times far better than the younger cohorts – or even their younger selves. The U.S. Census Bureau’s ongoing pulse surveys find that retirees are coping better in the pandemic, both financially and psychologically, than younger people.
Second, working in retirement is here to stay. Before the pandemic, 70% of Boomers said they expected to work past age 65, were already doing so, or did not plan to retire at all. The recession is a major financial setback for many who are approaching retirement. They are not just thinking about postponement, but also planning more specifically for working a bit longer into their retirement years. And that’s not a bad idea. By putting in a few extra years working full or part time, preferably at something enjoyable, they can reap numerous rewards – social, physical, and mental as well as financial. Although it’s hard to know how long the job market will take to recover, older workers may be attractive to employers as they scale back up, because retirees bring experience, are willing to work part-time, and can more easily handle flexible schedules.
Third, the essence of retirement is freedom. It’s not just the scaling down or ending of work. It’s a period in life where, for most, there’s far more freedom than ever before. In the U.S. alone, over the next twenty years, Boomers will have a surge of time affluence with 2 ½ trillion hours of leisure time to fill. There’s freedom from many of the pressures and constraints of child-rearing, eldercare, and work. That gives retirees the freedom to pursue their interests, calm down, reconnect with friends, and live more on their own terms. Many retirees (like the rest of us) have been demoralized by the sudden limits on our everyday freedom and interactivity. However, we can be sure that they’ll be very appreciative of the freedom when it returns and more focused on what matters most in their lives.
This is the first in a 10-part series on “The Future of Retirement” that we will be posting over the next several months. If you are interested in better understanding what’s ahead – we invite you to check out our new book What Retirees Want: A Holistic View of Life’s Third Age.