Financial planners need to come alongside their clients as they define their own version of the retirement life stage.

Originally posted at, by Eric Jordaan – Crue Invest (Pty) Ltd  , on September 11, 2019.

If you are planning to work for the rest of your life, it is entirely understandable if saving for retirement is not top-of-mind. The idea of a formal retirement at age 65 followed by a sedentary life of golf and gardening is becoming less and less appealing to many people. Nearly half of all US baby boomers still working do not expect to retire until they are 66 or older, and 10% predict they will never retire. While some will continue working because they need the money, the vast majority want to continue working because they enjoy it.

A Pew Research Centre analysis reported that the proportion of Americans over age 65 who were employed, full-time or part-time, had climbed steadily from 12.8% in 2000 to 18.8% in 2016, and that more than half were working full-time. There is more and more evidence that retirement is a fluid state and that the idea of a passive retirement is unappealing to most people.

This retirement fluidity can make saving for retirement somewhat challenging. How do you stay motivated to save for the future if you don’t plan to retire?

The history of retirement

According to historians, the modern retirement framework was created by Otto von Bismarck in 1881 when he agreed that the state would pay a pension to any non-working citizen older than 65. In doing so, he set in place an arbitrary retirement age that still exists today. The truth, though, is that retirement is not a natural state for human beings and, for most of recorded history, retirement meant working until you died.

In his book, The New Retirementality, Mitch Anthony calls retirement ‘a short-sighted political machination and social manipulation, which is no longer relevant and is hopelessly out of touch with our times.’

Retirement at 65 has become a default choice that most people haplessly accept. Despite being unrelated in any way to health, ability or longevity, it has become a societal norm and the accepted age at which we transition into a life of so-called ease and leisure. The fact that many retirees look forward to quitting their jobs at age 65 does not necessarily mean they are emotionally or mentally prepared to stop working. This is because many retirees are trapped in careers that never appealed to them in the first place but which offered stability, a good income and retirement benefits. Upon reaching retirement, they look forward to finally pursuing the passion or hobby they’ve put on hold all their working careers.

The result is a retirement revolution and a complete re-write of rules. Financial planners need to come alongside their clients as they define their own version of the retirement life stage.

The problems with a passive retirement

Transitioning overnight from being a productive member of a workforce to being a fully retired citizen seems a somewhat unnatural process. The accepted narrative has always been that we should actively pursue and look forward to the so-called ‘golden years’ of leisure and less responsibility. Little, however, is said about the detrimental effects of boredom, feelings of worthlessness and lack of purpose, and the increased risk of clinical depression post retirement. We need to accept that a life of permanent leisure is simply not an ideal state of happiness. According to Mitch Anthony, “One of the great tragedies in America is having enough money to do absolutely nothing and doing exactly that.”

Many retirees attest to not being fully prepared for the boredom and lack of purpose they are faced with in the first months and years after retirement. Without a full and meaningful diary, leisure time loses its significance and appeal. Ironically, while 60% of baby boomers fear running out of money more than death, their real concern is not that they won’t have enough money. The real risk is not having a plan to make the next 30 or more years of life meaningful which, in turn, increases the risk of depression, illness, divorce and premature death.

Enter the gig economy

The gig economy is a labour market characterised by flexible, freelance and on-demand work – the antithesis of the traditional nine-to-five model – and this economy is particularly appealing to retirees who, having formally retired from their jobs, are simply not ready to stop working. In the gig economy, workers are paid for each ‘gig’ they do – think Uber, Airbnb, dog-walking, house-sitting and tutoring. Typically, workers in the gig economy find jobs by registering on a website or through an app, and the over 50s are taking this economy by storm.

According to Uber, more of its drivers are over 50 than under 30, and about one quarter of its drivers are 50 or older. Similarly, Airbnb has become an increasingly attractive option for the over 50 market as it ticks all the boxes. Airbnb hosting is ideal for retirees who own property, want flexibility, need extra income and desire an opportunity to remain engaged and connected. A new report released by Airbnb highlights the activity of these senior hosts on their platform which shows they are increasingly opening their homes to travellers from around the world. In Europe, for example, the number of senior hosts in Europe has nearly doubled in the past year making them are the fastest-growing demographic of Airbnb hosts. Half of senior hosts in Europe say that hosting has helped them afford to stay in their home.

Not only has the gig economy provided real opportunities for retirees to freelance, consult and generate income through online platforms, it has also removed their fear of redundancy and lack of relevance.

Developing a non-retirement plan

Retirement guru, Mitch Anthony, has spent years asking thousands of people about their retirement visions and the majority of answers mention two overriding themes: balance and freedom. In line with this, retirement planning is moving away from just investment models and asset allocation to building a clear personal vision of retirement in whatever form it may take. Many pre-retirees are unenthusiastic about funding for retirement because, while they don’t aspire to a formal retirement, they also have no clear vision for this life stage except to know that golf and gardening is not an option. It is difficult to stay motivated to save and invest for something that is murky at best. Having enough money to retire is only one aspect of retirement planning. Knowing what you intend doing with the rest of your life is another thing altogether, which is why a well-designed retirement plan should take into account the financial, emotional, mental and physical aspects of your life in order to be a truly workable plan.

Regardless of whether you intend to stop working, work part-time or continue working throughout your life, a retirement plan remains an essential albeit fluid document for a number of sound reasons:

  • There are significant tax advantages to saving through retirement funds, with investors permitted to save up to R350 000 per year on a tax-deductible basis.
  • As one accumulates assets, the need for risk cover reduces and ultimately falls away, and this should be reviewed regularly to avoid paying for cover you no longer need.
  • Healthcare expenses tend to increase as one gets older and it is advisable to review your plan option every year.
  • It remains advisable to review and rebalance your investment portfolio at least once a year to ensure that it remains appropriate in respect of risk, returns and your investment horizon.
  • It makes sense to carefully manage your various income streams to ensure that you are drawing in the most tax-efficient manner and that your future cash-flow is secured.
  • As circumstances change, for example the birth of grandchildren or the death of a spouse, it may be necessary to review and revise your will.
  • For many retirees it makes sense to include their adult children in their retirement planning, especially where family money and assets are intertwined.
  • An important part of estate planning for business owners is to ensure that their businesses can continue to operate in the event of their deaths. A business succession should naturally be reviewed and updated regularly.
  • Unexpected events such as retrenchment and illness can happen and these need to be planned for. Similarly, many retirees change direction multiple times in this life stage which, in turn, will necessitate a review one’s retirement plan.
  • As adult children leave home, many retirees choose to downscale their family home in exchange for something smaller and easier to maintain. The selling of immoveable property will naturally pre-empt an updated retirement plan.

Retirement means different things to different people. Some dream of quitting work to lead a quiet life of gardening and golf. Others dream of re-skilling themselves to begin a new business venture. Many people long for a life of travel and adventure. Every person’s vision of retirement may be different, and yet all dreams are underpinned by the same common denominator: the freedom to choose. Financial freedom is about having enough accumulated wealth to choose what you want to do with the rest of your life. Whether it is work, play or travel, your retirement capital buys you freedom to spend your time on your terms. Let retirement be the start of anything you want it to be.