By Suzanne Woolley
THE baby boom generation has left its mark on music, fitness and politics. Next up: retirement. While some people dream of the “golden age” of relaxation, sun and travel that their parents enjoyed, many more have looked at the numbers and decided to keep working. (It takes a lot of savings to finance a 30-year vacation.) For others, working is a choice. (Why give up a good income and fulfilling career?) Either way, the generation famous for rewriting the rules is now reshaping life after 65.
The situation
Demographics are forcing changes in retirement expectations. From 2025 to 2050, the senior population worldwide is projected to nearly double to 1.6 billion. That will strain government benefit plans. Meanwhile, the world’s birthrate is declining. Fewer workers mean fewer people paying into pension programs. So governments are encouraging or forcing people to work longer. In Germany, 6 percent of people aged 65 and older are working; in the UK, that number is 10 percent; it’s 18 percent in the US. In Japan, where a median age of 46.9 gives it the world’s second-oldest population (surpassed only by Monaco at 52.4), 22 percent of people age 65 and older are still working. There’s room for growth: Surveys show 80 percent of Japanese seniors want to work. Some are finding it hard to live comfortably on pensions alone. Meanwhile, in China and India, only a small percentage of citizens are in any pension system.
The background
German Chancellor Otto von Bismarck offered the elderly the world’s first national old-age pension system in 1889. In the US, the first private pension plan was begun by American Express in 1875. By 1929, one-tenth of America’s workforce had company pension plans. Yet that same year, even before the Great Depression hit, 56 percent of Americans 65 and older couldn’t support themselves. The Social Security law passed in 1935 included a pension plan. During World War II, wage controls in the U.S. led employers to offer pensions to attract workers. Private pensions expanded through the 1970s until they covered almost half of workers. By the 1950s, retirees had money to spend and wanted to play. The number of golf courses in the US doubled from about 5,000 in the 1950s to more than 10,000 in the 1980s. America’s first retirement community, Sun City, opened outside of Phoenix in 1960. Things began to change in 1980 with the introduction of 401(k) plans. While defined benefit pension plans had promised workers a guaranteed stream of income in retirement, 401(k)s shifted the responsibility to save onto workers, who could contribute a percentage of pre-tax salary into an account they managed. Workers in such plans who invested heavily in the stock market lost value with every crash, and tough economic times led many to take early withdrawals. Fewer US homeowners reaching retirement age have paid off their mortgages, and student loan debt follows more Americans into retirement. Medical costs are rising. The result: American baby boomers face a far more uncertain financial future in retirement than their parents did.
The argument
Baby boomers are starting retirement without much in the bank. Close to one-fifth of Americans 65 and older are working and more people expect to work past traditional retirement age. Healthy seniors often want to stay on the job even if they don’t need the money. Some argue this prevents younger people from advancing in corporations and academia. Governments are encouraging older people to work. In 2011, the UK abolished its default retirement age of 65; most people now work as long as they want. The graying of the workforce is likely to continue. When asked what age they expect to retire, 10 percent of American baby boomers say “never.”
