Dramatic changes in how we live, work and stop working are presenting some unique challenges for the retirement sector. Our Group Development Director, Will Crawford, shares his thoughts here…
There are more options than ever before when it comes to retirement, while changes to the law mean we have more control over our own retirement finances, such as when we can begin to draw out our pensions.
But, if recent research is to be believed, it appears many people either aren’t aware of their retirement options, or those options are not within reach, or they’ve not planned sufficiently for their retirement.
The Institute for Fiscal Studies (IFS) found we tend to underestimate how long we will live for. For example, men born in the 1940s and interviewed aged 65 reported a 65 per cent chance of making it to 75, when the official estimate was 83 per cent. Likewise, women thought they had a 65 per cent chance of making it to 75, when the actual figure is 89 per cent.
Basically, people aren’t saving enough money for retirement because they are living longer than they thought they would. People are planning for 10 years of life after work, for example, but in actual fact spend 20 years in retirement, for example.
This raises a few questions: do we talk enough about retirement? Do educate people enough on the options available to them? Are we frank enough as a society about the costs of retirement and, crucially, are we helping younger generations to understand how they should prepare to fund their retirement?
Something to look forward to?
We know many of our residents at Retirement Villages had been looking forward to, and planning, their retirement for many years. You can read about some of our amazing residents on our case studies page, but it seems the ‘payoff’ of a life’s hard work, savings and planning does not feel achievable for many young people nowadays.
Or perhaps it doesn’t seem worth it?
According to research, 75% of people aged between 45 and 64 hope to retire between the ages of 55 and 65, but that figure drops markedly for those under 45. In fact, only 39.3% of those aged under 45 hope to retire between ages 55 and 65 and only 18.5% think it will be possible.
It’s likely the increased age at which we receive state pensions is skewing the statistics, but it does chime with a general feeling of pessimism when it comes to retirement options for the younger generation.
Financial challenges facing younger generations mean the focus tends to be on living for the now and dealing with those monetary pressures, rather than planning for later life.
Sadly, rising house prices, rising rental costs and debt (student or otherwise) are forcing millenials (those aged between 22 and 34) to make tough, and potentially unwise, decisions about their finances – even opting out of their workplace pensions because they found the monthly costs to be unaffordable.
Ultimately, this makes the job of saving for retirement even harder because said employee will be playing ‘catch up’ in later years.
When we hope to retire is changing
The news doesn’t seem to get much better either. According to research covered by The Independent, the numbers of people retiring after 70 has doubled since 2010 and more of us are working beyond our 70th birthday too.
The worrying thing is this appears to be out of necessity because of higher levels of debt, rather than a desire to continue working
Making the transition
David Bird, head of proposition development at LifeSight, a pension trust provider, had some interesting comments about how business can adapt to help a successful ‘transition’ into retirement:
“It’s worrying that many who are expecting to retire later are not doing so out of choice and are therefore more stressed and less engaged with their job. Businesses need to think about whether their benefit programmes are fit to support an older workforce and provide a productive transition into retirement.”
“Giving employees access to the tools that enable them to effectively plan for their retirement is also key. This will not only help ensure that people can retire when they want, but that they are productive employees for as long as they choose to be part of the workforce.”
Transitioning into retirement is certainly an approach we’d advocate. It’s generally accepted that gradually ‘winding down’ before full retirement helps people adjust their lifestyles, as opposed to a ‘full stop’ which could be quite jarring and unnerving for some.
But treating retirement as a transition also encourages people to start planning much earlier. For example, rather than retiring aged 68, you may begin to make lifestyle changes aged 65 – the practical effect is you would be more inclined to ensure you can sustain those lifestyle changes before you reach 65, instead of setting 68 as your deadline.
The ideal scenario is one where people begin to take more active management of their retirement finances and savings earlier on, rather than relying on workplace pensions alone or even the equity in their homes.
A positive change
There is an overarching sad context to this and that is retirement is being seen as a chore, too far off, unachievable or unaffordable.
It’s a real shame because retirement should be seen as a positive lifestyle change and something to look forward to in your later years – it just necessitates planning in your younger years.
Clearly, the challenges listed above are generational and won’t be solved quickly or easily, but we must start to educate people on how to plan for retirement much younger so they can make informed decisions about life after work.
Obviously, many of our residents can testify to the positive lifestyle change afforded by retirement and it’s one we want for as many people as possible, whatever form it takes.