Is it time to retire retirement?

However, I wonder how many people think like that anymore as they approach what we would regard as a normal retirement age?

The concept of retirement at 65 was first introduced as a welfare benefit by Otto von Bismarck in 1881.

It was clearly not expected to cost very much as very few people lived to that age. Since then, the age of 65 has become entrenched as a Western World retirement age, resulting in a binary attitude to an adult life of either being in work, or being retired.

However, we all recognise that this does not begin to reflect the realities of today’s world. Not only are we living longer, thanks to better healthcare, food and lifestyle, we are also living more active lives for longer.

This presents society with some big challenges, of which (excepting health) the most important one is finance. The concept of retirement at 65 can only work if you can be confident of supporting yourself and your spouse until death.

I believe we will increasingly see a widespread recognition of the concept of “peak savings”. 

Apart from a rapidly diminishing number of people who are fortunate enough to be in generous defined benefit pension schemes, many of which are bankrupting the businesses behind them, the only others in this very privileged position are employees of the State.

Politics makes it difficult for governments to address this issue as they are faced with increasingly unrealistic expectations of an anchored retirement age against a lengthening life expectancy.

This is made even more difficult by the advances in healthcare that enable those in the latter stages of their life to survive for longer: the frailty brought on by natural aging will create an ever-greater need for care.

In this regard, I admit to feeling rather disappointed by some of my own generation, the so-called “baby-boomers”.

We have been particularly privileged, enjoying a benevolent welfare state, final salary pension schemes, a property market the likes of which is unlikely to be repeated, along with free higher education and a strongly rising stock market.

With such good fortune, we should have been able to prepare ourselves for the later stages of our life without burdening others.

Unfortunately, there is, from some but not all, a sense of entitlement that society should pay for pensions and care for anyone that wants it.

However, society is increasingly made up of younger people starting their working life burdened with student debt, greater in absolute terms, and much greater in nominal terms, than any of us faced with our first mortgage.

They are also expected to repay those loans at the age that most of us were entering the property market and starting a family. 

These repayments, plus the loan interest, become a form of additional taxation coming at the very same time as they will be faced with even higher taxation to pay the cost of baby-boomers pensions and care.

However, returning to my subject of retirement, we are starting to see a significant change in attitude.

Those that are able to are now deferring it for as long as they can and in this they should be encouraged, not only to better look after themselves but also to continue contributing to society through taxation, while they still can.

There is also the issue of how the retired will keep themselves occupied. The thought of getting off the wheel of a nine-to-five life, clearly has appeal to many.

However, as it approaches and they start to ponder what they will do with all those free hours, many are now happily opting to defer it if they can.

Therefore, I believe we will increasingly see a widespread recognition of the concept of “peak savings”, probably not far off the age of 65.

That will be followed by a desire to continue working to remain occupied and to supplement the family coffers, whilst looking for less stressful employment that affords more leisure time.

How should we, as financial advisers, respond to this? To begin with we should no longer ask clients for their intended retirement date and go on to base everything around this. Instead, we should treat our clients as “still saving” or “no longer saving”.

As such, our role should be to assist in identifying their peak savings tipping point and help our clients both in the ascent to reach their savings summit, so that they may enjoy life after full-time work, and then help to manage the way down on the other side.

That’s how we can best facilitate an optimal balance between a life well-lived and the desire to leave something behind for our loved ones.

Paul Killik is founder and senior executive of Killik & Co