Many different retirement-related topics are covered by BlackRock’s Retirement Roundtable series, but at a recent New York roundtable, the very concept of retirement is being challenged. I caught up with Stanford University’s Laura Carstensen, Encore.org’s Marc Freedman and The Brookings Institution’s Josh Gotbaum to discuss how their radical ideas intersect.
Chip: You all had different wrinkles on a core idea: Our current concept of “retirement” doesn’t make sense any more.
Carstensen: It doesn’t. First of all, it’s much too long. I ask people all the time, “If you had 30 extra years in your life, where would you put them?” No one ever says, “I’d make old age longer.” Yet this is precisely what we’ve done. Life expectancy nearly doubled in the 20th century and without giving it a second thought, we collectively tacked on all the added years to the end. Only retirement got longer.
Freedman: “Retirement” is a construct anyway. Every 50 years or so, when the shape and contours of our lives need adjusting, we cook up new chapters. Such was the case with the invention of the “golden years” 50 years ago, when we concocted a vision of retirement as a kind of second adolescence (graying as playing). Fifty years before that we fashioned adolescence itself. At the time, the country was experiencing a proliferation of “neither-nors,” of young people who were neither children nor adults, and considered a potentially destabilizing social force. We resolved this tension through a social invention—a new stage post-childhood.
Chip: People forget, or never knew, that retirement pensions were created as a workforce management tool. They were a way for companies—particularly those involving physically intensive and potentially dangerous labor—to move older people out of the workforce. In an era when life expectancy was under 65, you didn’t want a physically frail 65-year-old working in a rail yard. But with life expectancy much higher and physical and mental health staying strong much later, why can’t a 65-year-old accountant keep working?
Gotbaum: There’s no reason he or she can’t. Except that most of our institutions are geared for people to retire all at once—to stop working entirely at 65, or even earlier. Neither the government nor the private sector have caught up with demographic reality.
Chip: But won’t people say: “Hey, I worked hard for this all my life for this chance to finally relax and now you’re telling me I have to work longer? Where’s my payoff?”
Carstensen: Some might—at first. But it’s becoming clearer and clearer that working longer promises scores of benefits for individuals and societies. Engaging in productive activities outside of the home is associated with cognitive, social and physical benefits in addition to the more obvious financial benefits. It is also proving unrealistic for most people to save enough over the course of a 40-year career to fund a retirement that could last just as long.
Chip: So what can we do?
Gotbaum: One thing we can do is create a legal right to a phased retirement. There’s no reason why retirement has to be this cliff-edge: Work full time until the last day before your 65th birthday and then never work again. Many people can and would phase down gradually—go from full-time to part-time or take lighter responsibilities—if they had the choice. But most people don’t have that choice. They should.
Chip: Why a legal right?
Gotbaum: Because it’s often the case that the law leads the culture. There’s lots of talk about phased retirement, but most companies don’t offer it. We should encourage them. Then they can discover what Marc Freedman and Encore have: Intergenerational workforces are smarter and more productive.
Freedman: That’s right. Since we invented “retirement,” there’s no reason we can’t invent a new stage of life, one that fits today’s demographic reality. To start, we should “rebrand” the period of life before retirement around the ideas of purpose and legacy—most fully embodied in the second-career phenomenon. We’ll also need to create a new set of pathways, policies and products—including financial vehicles—to help prepare people for this period.
Carstensen: I agree with Marc, and I think the financial piece is key. Innovative financial products can help people work differently, alternating between working full and part-time. Education should not stop in our early 20s. We should save for intermittent returns to schooling. Society should incentivize employer-based training that includes seasoned workers, as well as HR benefits from employers to fund fellowship/retraining years.
Chip: Sounds like you’ve given financial services a lot to think about. Thanks to all three of you for sharing your ideas with us.
For more research and insights on retirement from industry experts, visit the BlackRock Retirement Institute.