Life used to be predictable. So was retirement. For many, life was a near linear progression from one stage to the next-birth, childhood, school, young adulthood, work, marriage, retirement, and yes, end of life.
Retirement was a time to relax and enjoy the rewards of a lifetime of work-both for those in the workforce and those who worked in the home. It was a time to enjoy family, friends and frequent visits to sunny climes. Simple.
Retirement planning was to ensure adequate financial resources from a combination of pensions, social security and savings to pursue a life delayed.
But this is not your father's retirement. Both life and retirement are confounded by new complexities stemming from changing demographics and the new socioeconomic context of old age. Most of yesterday's retirees did not face the real possibility of one's lifespan outdistancing one's "wealthspan."
A 60-year-old today is likely to live three to six years longer than a 60-year-old retiree from 30 years ago, meaning most will now be looking at life well into their 80s. Most striking is the reality that within the 50+ population those 85 and older are the fastest- growing cohort.
More than years separate the generations. The new generation gap is expectations. The baby boomers born between 1946-1964 have more education than any previous group of Americans. The increase in college education has given rise to a generation of researchers. That combined with the capacity of the Internet to make everyone an "expert" is contributing to an attitude that with enough information and time they can figure it all out. That, in turn, raises expectations for what professional advice can and should deliver. Moreover, 60 years of economic growth and technological innovation have persuaded many to expect their life to be not only longer, but also better.
Family life has always been a crucial foundation of retirement. But today family dynamics are neither stable nor supportive of traditional retirement. Baby boomers had far fewer children than their parents: 1.8 offspring, on average, compared to 3.8 for their parents' generation. And even if there are children, they are increasingly likely to move to a different region or state to pursue economic opportunity. This limits the nearby availability of trusted help as well as the loving duties of grandparenting.
Moreover, while divorce rates have dropped nationwide, divorces among Americans over 50 have more than doubled, making relationships with children uncertain, later life finances more complicated, and the likelihood of living alone greater. Without adult children readily available, older adults will have to find and finance formal help to remain independent.
Ironically while care may be in short supply for future retirees, it is very likely that Americans in their 50s, 60s and even 70s will have more people to help care for than previous generations. For nearly one in four American families informal caregiving is a regular responsibility, especially for near retirement or retirement-age baby boomers. The average family caregiver is an adult daughter or daughter-in-law well into her 50s. Balancing these responsibilities hinders her ability to save and plan for her own retirement ahead.
The context of retirees' financial futures has also changed dramatically. Baby boomer parents could plan on the stability of pensions and social security. The next wave of retirees must manage defined contribution plans, the poor timing of the global economic downturn, continuing discussions of an unclear future of social security, and the rising costs of healthcare-all making for an uncertain financial future.
In light of financial uncertainty, the retirement strategy for many is to continue working. Indeed, an explosion of new business started by middle-aged and older Americans has changed our perceptions of an innovator. Entrepreneurs are no longer just wiz kids with an idea and a gadget, but include an energized older generation of Americans.
Older age is no longer about a predictable retirement that needs financial security alone. It is about managing an unprecedented evolving multi-act life and creative thinking is required. Here are a few transition points to help you move into tomorrow's longevity management business:
* Financial advice has always sought to link client goals to financial objectives. The next generation client lives in a different context and expects more than the traditional linear approach between money and goals. Baby boomer women, in particular, are now seeking someone with informed and empathetic expertise to identify the range of what's next. For example, the implications of long-term care decisions on the emotions and finances of family members, or how a new chronic condition may change life plans and future costs.
* Most clients tend to believe they will live a little longer than their parents. And chances are good they will live much longer than they anticipated. Advisors and product developers must develop powerful longevity visualization tools to help clients understand that the longer you live, the more likely you will live even longer-making delayed retirement, annuities and innovative life insurance products that enable access to income in extreme old age part of a longevity strategy.
* Financial products are about money. However, the new longevity client is seeking solutions. Longevity product innovation could begin with 'purposeful annuities' that link annuity income to trusted providers of services that may have once been provided by an adult child or spouse. These might include funds to provide home maintenance and modification from a branded home services firm; or financial management of living expenses for an elderly parent living far away; or end-of-life care and death services that both finance and provide the freedom to choose any service provider.
* Lifestage models are useful to understand the first two-thirds of life, but later life today is a work in progress. Finance is no longer about security alone, it is about linking informed advice and novel financial products that enable the start of something new-a business, going back to school or a career change, for example.
Longevity management is more than planning for money in later life. It requires a creative consumer-centered approach to build a platform of longevity education, financial products, planning services and the trusted solutions necessary to navigate a longer and better life tomorrow.
Joseph Coughlin, PhD, is the director of the MIT AgeLab.
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