Retirement revolution: the phased wind-down
One way or another, more and more of us plan to continue working past the traditional retirement age. One reason for this trend is financial. So what’s happening and what’s the best way to ensure we meet our retirement expectations?
When you think about retirement, how do you picture your life? Would you go on a Caribbean cruise, or spend quality time with your family? This might traditionally have been the idyllic retirement of our imaginations, but the reality today may be quite different. Gone are the days of retiring at 60 with a gold watch as a goodbye gift, to while away the rest of your life on a sun—drenched golf course.
Many more people are continuing to work into what would have been their retirement years, although the way they choose to work is changing. The Financial Conduct Authority’s (FCA) Financial Lives Survey 2017 found that 10% of adults aged 65 and over in the UK are still in work and, of these, 40% are self‑employed.
Jumping off the cliff edge
More than half of workers globally envision continuing some form of paid work in retirement — only about one in three view retirement as the point at which they immediately stop working. That’s according to Aegon’s 2017 Retirement Readiness Survey, which found that 'traditional views of retirement are changing; more and more, people see it as an active stage of life where they aspire to stay socially connected, involved in their communities and continue to work in some capacity.'
For some (31%), this looks like working part-time before winding down to full retirement. But another option is growing in popularity — a gap year between leaving full time work and embarking on the next phase. So called ‘grey gappers’ are over 55s taking extended overseas trips — according to research by the Post Office, the average time they spend travelling is almost four months, and they spend more than £4000. Some are trying out extreme sports like paragliding, rock climbing and bungee jumping, giving new meaning to the term cliff—edge retirement.
For physically active people, age is nothing but a number, and some see retirement age as the time for a career encore, either in the same field or in a completely different one.
Aegon’s survey found 15% of people plan to continue working in the same field past retirement age, while 11% will keep working but in another industry. Some 10% said reaching retirement age would make no difference at all to the way they work.
Of course, not everyone will be able to work as they would like due to ill health or not being able to find appropriate job opportunities. But they can get around this by creating their own employment — about 10% of people Aegon surveyed globally said they plan to start a business.
Another option is to take on a ‘hobby job.' These are less demanding jobs which focus on existing skills and interests, with hours that better suit older people’s lifestyles. Examples might include dog walking, running an eBay business, baking, or taking a weekend job in a shop.
For those who are more financially secure, volunteering holds more appeal than paid work, with about 26% planning to do this. But travelling (62%) and spending time with loved ones (57%) are the top priorities for most.
Why keep working?
For a lot of people, the drive to keep working is purely financial. Part of the reason for this is that intergenerational wealth transfer is increasingly happening while people are alive, not after they die, as used to be the case. The FCA report found that 2% of adults over the age of 65 still have financially dependent children.
There is also concern for their own household income among people of retirement age. According to the FCA report, the mean household income above the age of 65 is £29,000, and we know that there is a large gap in this country between the length of time spent in retirement, the level of desired income, and the size of the pension pot meant to fund it. Aegon’s research found that 73% of people will keep working because they are worried about their income and the size of their savings pots.
Looking specifically at the UK, 29% of people in Aegon’s study said they expect to retire at age 70 or older, while 2% say they will never retire. It seems clear that cliff—edge retirement is a thing of the past, as retirees shape a new future for themselves, with both work and leisure included.
The only way to ensure we have enough to meet our own financial expectations for our retirement is to start investing as early as possible, work out our targets and ensure we’re contributing enough to meet them. Use our pension calculator to see how much you could need in the future, and whether you’re saving enough to meet your financial targets.