We desperately need to disrupt our approach to retirement saving

The numbers behind the world’s shifting demographics are at times difficult to comprehend. Human life expectancy has boomed since the industrial times, doubling between 1900 and 2000. Scientists predict that more than half of babies born in rich countries today will live to be 100.

However, declining birth rates around the world means that there are currently more people over the age of 60 than children under the age of 5. In fact, according to the WHO, over the next 30 years, the proportion of the world’s population over 60 years will nearly double from 12% to 22%.

Current retirement and pension systems are not equipped for the reality of unprecedented longevity and shifting work and health outcomes. Neither are most people’s life plans. The Stanford Center on Longevity recently suggested that the 30 extra years of life people are living should be seen “as a dividend that can be strategically distributed across all stages of life.“

We need to be similarly imaginative in creating new and improved policies that will address the changing financial needs of all citizens over the course of a 100-year life.

Living a multi-stage life

This break in the traditional societal norm of going to school, building a career, and then retiring is already happening for millions of workers around the world. People might decide to take a break from work in order to raise children, care for sick relatives,  or go back to school, even in mid-life, to learn a new skill so they can advance in or change their career. They might work gig jobs and work on demand, or choose freelance work that lets them set their own schedule.

As workers age, some have no desire to retire; they still feel healthy and productive, they may not want to give up the sense of community they have at a workplace, and their jobs perhaps don’t have the physical demands that make continuing indefinitely impossible. Others will want a phased retirement and continue to work several days a week, while still others will be looking forward to a more traditional, and traditionally timed, full retirement..

Our different ways of working, living, and spending has made the one-size-fits-all retirement plans of the past, where money is saved up to be spent in the later years of life, neither feasible nor practical. Many people will want to spend that money during one of the aforementioned transitions perhaps, or for other reasons that today may be seen as a career “interruption” but will someday be considered part of the regular ebb and flow of a long, productive life.

Real change requires multi-stakeholder solutions

The need to address changing demographics and the financial implications they encompass is an issue that knows no border. Every country will be dealing with this reality in the coming decades and we will need multi-stakeholder solutions to be prepared.

What should we be asking of our leaders and of ourselves to help people stay financially resilient as they live longer lives?

Policymakers: Be more innovative. Help people create better savings plans that make sense for the way we live and work in the 21st century. The pension plans from the last century will not work anymore.

Private sector: Be more inclusive and equitable. Make financial products for all of society, not just the wealthy. Gig workers, stay-at-home moms, and lower-income workers all need savings options. Update your financial literacy plans for this new demographic reality.

Individuals: Be bolder. This is the time to rethink everything. Don’t be afraid to pivot and change careers or learn a new skill. There are thousands of courses, certificates, and degrees that can be obtained online at very low cost.

Society: Be kinder. Stop promoting ageist stereotypes that depict this demographic change as a problem. A longer lifespan with more choices in how we fill it is a privilege. Whatever challenge it presents to our long-held beliefs or established systems for things like retirement saving is also an opportunity to expand our sense of what’s possible for ourselves and for policies covering practical needs — like a better savings plan for all citizens for the next century.

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