Our Demographic Destiny and
Why Retirement As We Know It Is Dead
By Bradley Schurman
The future of retirement security may depend on whether we understand our demographic future. We need to pay attention because we are approaching the “Super Age” and failing to adapt today’s system to be able to meet the needs of tomorrow.
The United Nations defines the Super Age as the period when one out of five people, or at least 20% of the population, will be over the age of 65. Countries such as Germany, Italy, and Japan have already reached their Super Age. However, more than 31 other countries will reach this designation by the year 2030. Although the United States has not yet reached its Super Age, several states — such as Florida, Maine, West Virginia, and Vermont — are already there.
These statistics point us to three stark realities: Aging is happening everywhere (in the U.S. and globally), the life course has altered fundamentally, and retirement — as traditionally known and expected — is dead.
Aging Is Everywhere
For most of human history, life expectancy was about 35 years, and very few people enjoyed a long life. In the 17th and 18th centuries, one-third of children died before the age of 5 and one-half of children did not live to adulthood. Since the time of the first Industrial Revolution, this trend slowly began to shift as advances in science and technology allowed more of the population to age to adulthood and people began living longer, healthier lives. At the same time, the number of births per household decreased. More recently, we’ve seen an acceleration of these shifts, leading us toward the two merging mega-trends of today: decreases in birth rates and increases in longevity, which together have the cumulative effect of increasing the average age of our population.
Because of the aging of the population and the continued decline in birth rates around the world, demographers now expect the population growth of many countries to begin to slow significantly, with the potential for real decreases in populations.
In the United States, at least one-half of the population is now over the age of 38. According to analysis of data by the Georgetown University Center for Retirement Initiatives, we will have a 32% increase in the number of Americans over the age of 65 between 2020 and 2040.
Although aging is everywhere, it is important to note that it is not the same for everyone. Longevity is closely tied to race and gender. People who are higher-educated, have higher incomes, and are living in urban areas are more likely to live longer. White cisgender gay men earn the most money, while Asian cisgender women live the longest. Trans women of color earn the least and live the fewest years. The space between those who live the longest and the shortest is known as the “longevity gap.” One of the starkest examples of this is the fact that within the city of Washington, D.C., there is a 27-year difference in life expectancy between the richest and poorest residents, and this is true in other cities like New York and Chicago.
Super Aging Has Altered the Life Course
Various social policy and scientific interventions that have emerged in post-war America have altered the life course and increased life expectancy. As a result, we have seen evolution in the stages of aging and life.
At the turn of the 20th century, most people experienced childhood, adulthood, and old age, often reflected in a lifespan of about 44 years. By the 1960s, children were living into adulthood and the average life expectancy was approaching 70 years of age. By the 1990s, the average life expectancy continued to increase to age 75 or longer, meaning what was considered “old age” continued to evolve. In 2021 and beyond, we are now seeing many people living past the age of 80, which can be 10 to 20 years past retirement.
This has created new opportunities to develop financial products and services throughout life, not just for retirement.
What we are seeing with “Super Agers” is a new life stage: They are living past retirement, yet exhibiting characteristics of middle-aged workers — they are engaged in full-time, part-time, or volunteer work; they are still earning money through either active or passive income; and they are spending. They are active consumers and not necessarily on fixed incomes.
An important takeaway is understanding that when we extend life, we are not tacking years onto the end but adding years to the middle of life, and that creates an incredible amount of opportunity for the types of products and services being offered by the financial services and retirement industries. We want to make sure that individuals have the access to funds they need throughout their lives, because as those lives change, they will run into specific challenges and needs at different times.
Why Retirement Is Dead
Over the past 30 or 40 years, we have been shifting responsibilities from institutions to individuals. Individuals are being required to take on more of the burdens associated with aging and there are recurring concerns about the future of Social Security, Medicare, and Medicaid. As a result, many more individuals are working past traditional retirement age, either out of want or out of necessity — typically necessity, and necessity is because they need to have either social interconnectivity or financial security, or both.
Before the pandemic, there were roughly 250,000 people over the age of 80 in the workforce, and this number is predicted to grow as we emerge from the pandemic. As previously noted, this points to moving from a five-generation workforce to a six-generation workforce (working from age 20 into 70 or 80 years of age).
We do not usually think of older people, especially the oldest people in society, working this long. However, there are intrinsic health and economic benefits to working longer. Not only are we seeing individuals as active contributors, but it also is good for mental and physical health. Social isolation is a public health crisis, but it is something that we can remedy by keeping people working longer if they can and want to work.
At the same time, we also are hearing that there is a contraction in the labor force. But to be clear, there is no labor shortage. There are enough people to do the jobs.
During the pandemic, droves of older people left the workforce, either because they were afraid of getting sick or because their employers were concerned about costs or had the misperception that older workers could not adapt to changing demands and skills. And some older Americans simply decided their retirement investments had grown enough that they could afford to stop working.
The biggest takeaway from that experience is that as we approach the Super Age, it is inevitable that we will see more older Americans working longer and, indeed, our economy has to have some people working longer. At the same time, the United States and many leading economies are simply going to be home to fewer people overall, living longer lives, who will need to accumulate or have access to secure financial assets that will last into very old age. While challenging, these trends and perspectives for the future create new opportunities for the financial services and retirement industries to develop products and services that can be used throughout life, rather than only for retirement.
Bradley Schurman, a demographic futurist and opinion maker on all things dealing with the business of longevity, is the Founder and CEO of The Super Age, a consulting firm that helps leading organizations harness the opportunities of our increasingly older and generationally diverse populations. His insights inform national leaders and C-suite executives around the world.
His book, The Super Age: Decoding Our Demographic Destiny, will be published on January 18, 2022, and can be ordered from your favorite bookstore or via Amazon.
You can connect with Bradley via LinkedIn or view his recent interview with Fabrice Houdart, where they discuss The Super Age as an invaluable resource for any businesses interested in diversity, equity, and inclusion.
December 2021, 21-08