The concept of retirement was introduced during the late 19th and early 20th centuries. Until then, short life expectancy and the lack of financial provisions (pensions) meant that most workers worked until death. Germany was the first country to introduce an old-age social insurance programme in 1889.
The early 1900s saw interest groups moving older people out of the labour force to accommodate younger ones. The age of 70 was the ‘retirement age’ (later reduced to 65). Manual labour dominated the working environment and it was not expected that one would live beyond age 63. As life expectancy grew, the youth subsidised pensions of the elderly.
In the US, people paid towards a social security system in taxes, but seldom benefit because they never lived long enough. In 1937 when the system began in the US, there were about 20 workers paying an annual tax of $30 to support each retiree. By 2011 when the first baby boomer turned 65, there were about two workers per retiree paying an annual tax of up to $15,000.
Today most work is mind and knowledge based, and with medical technology people are living longer. It is expected that children who are born from 2033 could live beyond 400 years old. We have identified more than 60 genes responsible for aging and evidence suggests that living for thousands of years is possible. Dr Aubrey De Grey, Chief Science Officer of the SENS Research Foundation, believes that the first person to live to 150 years has already been born and the first person to live to a 1000 is likely to be born less than 20 years after that person reaches 150.
As people gain a better understanding of how to manage physical health and scientists are developing ways to extend life expectancy, for example the expected development of a sunscreen pill from reverse engineering of how coral reefs protect themselves against the sun.
If we believe that retirement is invalid as a concept and that we should retire when we cannot work anymore, perhaps our planning process will change.
Countries’ social systems cannot fund retirees and work contracts are starting to be re-structured to accommodate longer working terms. Fewer people can afford to retire, and people are living far longer than their money lasts.
How should we deal with these realities? Research conducted on tribes in the world which have been unaffected by modern ‘civilisation’ found that a reason for longevity is that the elderly all have a function in the tribe.
There are many stories of people dying soon after retiring, or becoming depressed and lonely – attributed mainly to a lack of purpose and a disconnection from their former lives.
Employment agencies are emerging with a focus on the over 60s and placing people in positions that accommodate their energy levels and abilities. Perhaps we will realise we have less of an unemployment problem but rather an employment problem because we refuse to acknowledge the wisdom of trained and experienced older people.
The financial services industry is growing in awareness of these challenges and the subsequent opportunities in a simple mind-shift.
Cannon Asset Managers believe that investors need to take into account longer life expectancies. People could aim to work or contribute to society until they are no longer able to. Education of our clients is a vital component of our strategy and we continue to highlight this with them. Working in conjunction with the client’s wealth planner, we encourage investors to understand what growth they will need from their investments to provide enough capital for their future.