While it’s no secret that people are living longer and retiring earlier, the economic and social trends associated with this phenomena are changing the way older Americans prepare for their “bonus years” and reinvent themselves, according to a globally known demographer set to speak in Rohnert Park on Feb. 24.
Ken Dychtwald, Ph.D., is founder and CEO of Emeryville-based Age Wave, a visionary research and consulting firm focusing on issues relating to the maturing marketplace and the profound business, social, health care, financial, workforce and cultural implications created by a rapidly aging population. He is the keynote speaker at the 23rd annual SSU Economic Outlook Conference to be held from 7:30 to 11:45 a.m. at Sonoma State University’s Student Center Ballroom, located at 1801 E. Cotati Ave. The theme of this year’s conference is “Economic Wave, Age Wave.”
Retirement is changing and being driven by three dynamic forces: Rising longevity, moving toward a new work/life balance, and redefining a life purpose. “We’re in the midst of an incredible longevity revolution. More than half of the men and women who ever lived past the age of 65 in the entire history of the world are alive today. So the question is, what does this mean when it comes to retirement?”
He said old age isn’t what — or where — it used to be. For 99 percent of the time humans have walked the earth, the average life expectancy was 18 years. People died young of acute infections, accidents, trauma or childbirth before they were old enough to have bodies with age-related problems such as heart disease, osteoporosis and Alzheimer’s.
Fast forward to the year 1000. The life expectancy at birth over the past millennia has increased dramatically, with most of the change coming since 1900. On the first day of the 20th century the average person could expect to live about 47 years, but on the last day of 2000 the average person’s life expectancy was up to about 78 years — a 30-year increase. So, in Dychtwald’s words, “What do we do with this longevity bonus?”
Until recently, most people lived a linear life plan with three key components, including 18-20 years devoted to education, about 35 years for a career and family building, followed by approximately 10 years for leisure in retirement. “The biggest change has come at the end of this traditional linear plan. With people living up to three decades longer, no one wants more longevity just to be older longer. Rather, people want to be younger longer. They want the freedom to live life on their terms.”
A new cyclic life plan is emerging, according to Dychtwald. “People today are using their longevity bonus throughout their life cycle as part of their ongoing work/life balance without waiting until their senior years. They may go back to school, fall in love again, start new careers or take time out to kick back, explore the world and take up new challenges several times during their lives.”
He says he’s a big fan of Abraham Maslow, an American psychologist who created the hierarchy of human needs in 1943. The original hierarchy started with basic physical needs at the bottom moving up to security and safety, love and belonging, self esteem and finally self-actualization (becoming everything you are possible of becoming) at the top of the pyramid.
“I don’t know that I agree with that highest level,” Dychtwald said. “Another stage, called purpose, is needed — the need to give back to others and bring meaning to your life.”
To reinforce his assertion, he cited a famous quote by Winston Churchill: “You make a living by what you get, but make a life by what you give.”
Financial freedom has been the key to realizing retirement dreams, but with a new, extended life cycle and its bonus years, retirement planning is now about more than money.
“In working on a project with Merrill Lynch, we discovered there are seven primary priorities for people in retirement — health, work, giving, family, leisure, home and — of course — money,” Dychtwald said. “As with life itself, these priorities are not static, they’re in constant motion.”
He observed that if life was like a calm lake with no current or wind, and we could see the other side, and it was a straight shot, all we would have to do is row left and right to get there, we wouldn’t need a lot of financial advice. But, he added, life is not like a lake.
“In reality, life is more like a twisting, turning, unpredictable river,” Dychtwald said. “As we live longer the world throws us new challenges. As a result, our personal lives change due to all of these emerging life cycle unknowns. Consequently, there is a greater need for a trusted guide to give us advice.
“My son and I took a river rafting trip through the Grand Canyon. We got on the raft and the river seemed very calm. Within about 10 minutes, we entered a level 4 rapid and it immediately occurred to me who the most important person was on that raft — the guide. Why? Because he knew what was up ahead.”
Retirement is more like white-water rafting, he said.
“Who is going to be your guide?” he asked. “You may have several, but a primary guide is likely to be your financial advisor. As we talk about the seven life priorities of the new retirement, we will revisit the raft from time to time to address what advice your guide — your advisor — could give you regarding these life priorities.”
Beginning with family, Dychtwald says the Age Wave family cycle is more like a three-dimensional cube today with ongoing commitments, continuing care factors and financial support associated with all of its members.
“I’d like to introduce you to a fictitious 62-year-old couple, Liz and Scott,” Dychtwald said. “They’ve been saving for retirement and working with an advisor to help them make prudent decisions, but they are also experiencing unexpected family money complications. They’re concerned about their daughter, Emily, who has just been through a divorce. She and her son, Josh, need to temporarily move back in with them, and this expense was not part of their retirement plan.”
He said they also have a son, Brad, and have been slipping him money on a regular basis for years to cover the basics, even though he’s old enough to support himself. At the same time, Liz’s parents and mother-in-law are getting older, and her father is suffering from Alzheimer’s and will need paid home care, or will possibly have to go into a nursing home. But her parents don’t have the money. Add to all this the fact that Liz’s brother lost his job and is struggling financially, and her sister, Sandra, has student debt.
“Family complexity can often lead to financial complexity,” Dychtwald said. “Ask yourself, in the last five years, have you provided financial help to family members? Unexpected family needs often take couples off track in their retirement plans.”
Dychtwald reports study results showing that 60 percent of people age 50-plus provide financial support to adult children, grandchildren, parents or in-laws — even siblings and other relatives. “So now we are back in that hypothetical raft and you might ask your financial guide how you can balance your needs and dreams with family needs.”
As we get older, there is a lot that can go wrong health-wise. Age Wave asked people what is the most important ingredient to achieve a happy retirement. Good health was rated No. 1 — (81 percent) ahead of being financially secure (58 percent), and even higher than having a loving family and friends (36 percent).
He said we all should make sure we have excellent medical care and practice wellness in our everyday lives, yet people tend to imagine getting older like their parents did, with the same old fashion technology in place. However, the world is experiencing exponential scientific progress and medical technology breakthroughs all the time.
“Even technology giants like Google are working to solve the health problems of aging, evidenced by a cover story in Time Magazine a while ago [titled]: ‘Can Google Solve Death?’ ” Dychtwald said. “So consider asking your adviser, ‘What if I, or my loved ones, get sick?’ ”
WORK VS. RETIREMENT
Merriam-Webster defines “retirement” as “to disappear, to go away, or to withdraw.” As part of Dychtwald’s Merrill Lynch/Age Wave research, participants were asked which options represent the ideal plan for the next stage of life. Results showed a majority consider a flex retirement plan to be the new ideal: 39 percent said it would include part-time work; 29 percent would never work for pay again; 24 percent would cycle between work and leisure; and only 8 percent would involve full-time work.
Age Wave also asked more than 7,000 people what they would miss in retirement. Preretirees suspected that the biggest loss they would have is a reliable income (25 percent). But there are other reasons why people choose to work during their Golden Years, including social connections (22 percent), mental stimulation (18 percent), having a purpose and work goals (18 percent) as well as having employer health insurance (17 percent).
When retirees were asked the same question, social connections topped the list (44 percent) while having reliable income accounted for only 13 percent. Retirees agree that working in retirement helps people stay more youthful (83 percent). Two-thirds also said that when people don’t work in retirement, their physical and mental abilities decline faster.
Phased retirement could be a good middle ground, according to Dychtwald, allowing people to keep their social connections, and a partial paycheck, while working less.
“You might ask your adviser, ‘Who am I now, and how can I make the most of this life chapter?’” Dychtwald said.
Merrill Lynch/Age Wave researchers asked Baby Boomers (those born between 1946 and 1964 representing nearly 20 percent of the U.S. population) what they wanted in their next stage of life?” Boomers overwhelmingly want to have more fun (46 percent), with reduced stress (44 percent), more time with spouses or partners (42 percent), simplifying life (34 percent), hobbies (33 percent), along with rest and relaxation (32 percent).
“What will we want from the New Leisure?” Dychtwald asked. Research revealed five key things: to disconnect from the hustle and bustle of life, to reconnect with loved ones, to continue learning, to play and have fun and to fall in love again.
“You may want to ask your guide or advisor, ‘Now that I’m in or nearing retirement, where’s the fun, play and pleasure?’ and ‘What can I afford?’ ” he said.
Housing needs change throughout our lifetime.
“If you decide to move as you are nearing, or in, retirement, there are several things to consider when seeking an ‘age-friendly’ community,” Dychtwald said.
Factors include safety and security (you want to feel safe in your town); a sense of community (are residents happy to be there and do they relate to one another); learning and enrichment (maybe you are interested in taking community college classes or attending cultural events); and a vibrant, affordable economy (you don’t want to move to a place that is either going to blow through all of your retirement saving or, alternatively, a place that is depressed economically).
Work and volunteerism are also important considerations (how will you spend your time and are there job opportunities and charitable groups to join where you want to live?). The availability of public transportation is a major concern (you may not always want to — or be able to — drive your car, so are there alternative means of transportation?). And access to excellent, local healthcare is vital (since this becomes more and more important the older one becomes).
“When examining sense-of-place considerations, you may want to ask your adviser — your guide, ‘Where and how should I live, and why?’” Dychtwald said.
Giving is the next big issue. This goes beyond contributing money and includes giving back using one’s wisdom, time and skills. When retirees were asked about their greatest motivation for charitable giving or volunteering in retirement, 81 percent said making a difference in the lives of others. Meaning and purpose in life was mentioned by 61 percent followed by being mentally and physically active (36 percent), friendships and relationships (36 percent) and in connection with religious or spiritual beliefs (34 percent). Overall, two-thirds of retirees say retirement is the best time to give back.
It is interesting to note that retirees out-give the general U.S. population by a significant margin. While retirees represent 31 percent of the population (three in 10 adults are retired), they provide 42 percent of total money given, and account for 45 percent of all the hours volunteered in America — making retirees the most generous among all other groups in various life stages.
Dychtwald said America gains an $8 trillion longevity bonus (2016–2035), in terms of the value attributed to retiree’s with an average 20 year longer life span. He said this value is “Hiding in plain site.”
“Over the next 20 years, if you look at the amount of time (58 billion hours) retirees are anticipated to volunteer, this translates into $1.4 trillion of financial value,” Dychtwald said. “Over this same two-decade period, retirees are expected to contribute $6.6 trillion in charitable donations. Together this adds up to the $8 trillion longevity bonus.”
While there is a lot of discussion about how older people are a drain on society and take a lot out, he said what we’re beginning to see is a major upside to aging.
“This is piece of the puzzle we don’t nearly give as much attention to based on the growing resource pool represented by long-lived, older adults that could have an enormous transformation effect on our culture from all of the giving they provide in terms of money, minutes (of their time) and meaning (values).
“As we talked to people about this, many said they never imagined that older people were giving so much. Others say it never occurred to them that the aging of Boomers would not only put a strain on our medical system, but that it could also create an outpouring of volunteerism and charitable contributions.”
When speaking with your adviser about giving, ask, “What is my purpose, and what will my legacy be?”
Dychtwald’s organization asked retirees, “Which of the following are very important to pass on to your children or heirs?” A majority of retirees (62 percent) said passing on values and life lessons is the most important — nearly twice as important as the passing of money or property (32 percent).
Another question asked, “Which of the following are very important to receive as part of an inheritance?” Younger generation respondents also prioritized receiving values and life lessons as the most important (55 percent).
When asked what will give you the freedom to do what you want, when you want and on your own terms, 51 percent of those surveyed said achieving financial independence is the key to unlock retirement’s full potential — far ahead of those who said stopping work permanently (18 percent), leaving their principal career or job (17 percent), receiving a social security check (5 percent), being eligible for an employer pension (5 percent) or being a certain age (4 percent).
Why is all of this so important? Dychtwald predicted that over the next decade, leading industries, companies, governments, and major institutions will be challenged to transform their strategies, marketing, branding, distribution, product development, and workforce management.
At the same time, preretirees should consider their options for attaining financial independence when planning for a future that will give them a rich and rewarding experiences as they pursue the seven key priorities and strive to achieve their true purpose.