As recently as two decades ago, retirement was seen by many as a fixed, reliable life milestone. You reached a certain age and immediately shifted into relaxation mode. Today, however, retirement looks and feels different. A new career choice is common, some may pursue hobbies, or a retiree could dedicate a majority of time to volunteering.
A whitepaper released in early 2019 explains five emerging demographic and lifestyle trends that are further changing how Americans plan for the future, including these mindset shifts: where we work, how we communicate, how we use technology and how we view our lives.
“Rewriting Retirement” from RBC Wealth Management polled 1,400 Americans, half retired, half nearing retirement. The short story: pre-retirees still in the workforce have a goal to travel during retirement yet fear running out of money. The already retired are focused on health and relationships as they strive to maintain their quality of life during retirement.1
Here are the report’s five factors that are reshaping retirement as we know it, and how they may be affecting investment plans.
1. Today’s Modern Family
The structure of American families is changing. According to Pew Research Center, children living with an unmarried parent has jumped from 13% in 1968 to 32% in 2017. Not surprisingly, children living with two married parents dropped from 85% to 65%.2
There’s simply more divorce, remarriage, cohabitation and multigenerational households. Plus, many millennials are delaying marriage or not getting married at all. As family structure and dynamics change, new consideration must be made for legacy planning, expense funding and geographic challenges.1
2. Living Longer and Healthier
The Social Security act, passed way back in 1935, set the age of retirement at 65. Yet at that time, the average life expectancy was 61, drastically different than today’s average life expectancy of just under 80.3
Not only is life expectancy longer, quality of life is often better, too, thanks to medical advances and medical procedures, some of which are now routine: hip replacement, cataract surgery, etc. Today’s retirees are more physically active, spend time with family/friends, start their own businesses and more easily act on their passions.1
3. Burden on Medicare
In 2017, Medicare spending was 15% of the federal budget, the same as defense spending, and is expected to reach 18% by 2028, according to the Henry J. Kaiser Family Foundation.4
Since health systems continually refine provided services as well as seek cost relief to fund care, maintaining Medicare long-term will require changes. Possibilities include shifting to cost-conscious care and charging higher premiums for those yet to retire, disproportionately impacting “high income” individuals.1
4. Older Americans at Work
The number of employed people age 65+ rose nearly 35% between 2011 and 2016, according to a SeniorLiving.org study. This group is projected to be the workforce’s fastest-growing segment through 2024 as older Americans continue to work later in life and launch new careers.5
It’s natural to expect Baby Boomers reaching traditional retirement age in good health to remain in the workforce.
5. The Longevity Economy
The average age of Americans continues to rise. To meet the needs of the ever-growing age 50+ population, a new type of economy is emerging that impacts virtually every sector: technology, health care, housing and more.
Having a solid infrastructure like this can help support seniors as they age. They’ll have goods and flexible services available to them that were not just a generation ago.1
Although the traditional idea of retirement may not be the same moving forward, retirees still have needs that a financial advisor can help strategize. It’s important to encourage older clients, pre-retirees and those already in retirement, to keep vigilant when it comes to planning and communicating their hopes and dreams.
You can also help your clients consider the emotional aspects of their new lifestyle. Five Strategies for Physical and Emotional Wellness in Retirement provides empowering tips that inspire approaching retirement with passion and purpose. Click the link below to access your copy.
1RBC Wealth Management, Rewriting Retirement, February 2019
2Pew Research Center, About one-third of U.S. children are living with an unmarried parent, April 27, 2018
3Inc., It's Time to Say It: Retirement Is Dead. This Is What Will Take Its Place, February 19, 2018
4Henry J Kaiser Family Foundation, The Facts on Medicare Spending and Financing, June 22, 2018
5SHRM, Number of Older Americans at Work Has Grown 35 Percent, February 2, 2018