In 2020, the world was turned upside down by the Covid-19 pandemic. But 2020 also marked another milestone that will change our world: The number of people 65 and older outnumbered children under age 5 for the first time in history. And this is just the beginning.
Our ability to live longer, healthier, more productive lives is one of humankind’s greatest accomplishments. Over the next two decades, the number of people age 65 and older will nearly double to more than 72 million—or 1 in 5 Americans. And most 65-year-olds today will live into their 90s. Some researchers believe that the first person who will ever live to 150 is alive today.
Think of it another way: Picture a 10-year-old child. That 10-year-old today has a 50% chance of living to 104. And the older she gets, the more the odds rise.
The question the retirement and financial-services industries must ask is: What can we do—not only to help people afford their longer lives—but to help them thrive as they age, even as a 104-year-old? How can we create innovative solutions that help people live better throughout their lives?
One answer is that instead of “saving for retirement,” we should think in terms of “saving for life.” I believe that the financial-services industry can provide the tools, resources, and solutions people need, but that requires rethinking attitudes about aging and retirement.
The first step is to create a new mind-set around aging. The traditional view of life was that we’d peak in the middle of our lives, retire, and go into decline. As we’re seeing at AARP, that isn’t happening as frequently.
People are embracing age as a period of continued growth. Instead of just seeing dependent retirees, we’re beginning to see a new type of experienced, accomplished workforce. Instead of seeing expensive costs, we’re witnessing an exploding consumer market that is bolstering our economy. Instead of seeing a growing pool of dependents, we’re seeing the growth of intergenerational communities with new and different strengths.
Yet, while many people are rethinking ways to approach their longer, healthier lives, one of the things they fear most is that they may outlive their money. Unfortunately, for many people, this fear is a very real one.
Although life expectancy continues to increase, individuals and industries haven’t yet adapted to the need to earn, save, and manage financial resources to support longer lives. A recent survey by New York Life found that even though many people express increased confidence in their ability to achieve short-term financial goals, they feel like their long-term goals are still out of reach.
At AARP, we believe the time has come to change the conversation about preparing financially for our later years. For many people—especially those who are younger—retirement in the traditional sense has no meaning. Likewise, the idea of achieving financial security is also a nonstarter. Having experienced the Covid-19 pandemic and ups and downs of the job market, the stock market, and the real estate market in recent years, they often view saving for retirement as an exercise in futility.
The old model of saving for retirement was the three-legged stool represented by Social Security, individual savings, and employer-provided pensions. If people had these three sources of retirement income, they could balance their financial demands and not outlive their money. It was seen as a time of drawing down one’s assets, not building up more.
That’s why older persons are so often seen as a drain on society. They’re seen as taking money out of Social Security, not paying into it. They’re seen as taking money out of the pension system, not adding to it. As more people work beyond traditional retirement age, they’re doing both.
A key part of that retirement model that most of us have grown up with is freedom from work. Today, a key part of extended middle age is the freedom to work. Many of us want or need to continue earning a living, and are searching for ways to make a difference in society through the work we do. This requires reimagining work and breaking down social and institutional barriers that stand in the way.
Thinking in terms of “saving for life” creates a new vision of financing our future that expands from saving for retirement to enhancing our financial resilience, especially during our traditional retirement years.
This new vision requires a model built on four strong pillars:
Social Security—the foundation of financial resilience in our later years.
Pensions and savings—Whether through a 401(k), an individual retirement account, or other means, increasing private savings is critical to achieving financial resilience throughout our lives.
Health insurance—No one can be financially resilient throughout their lives without adequate insurance to help cover the high cost of healthcare.
Earnings from work—Today, work is considered a key source of income during traditional retirement years.
Creating a new pathway to achieve this vision based on these four pillars can be a daunting challenge, but innovative solutions and tools are emerging to help us achieve it.
The shared economy isn’t only helping us to live better; it’s also providing new sources of income. Employer-provided financial wellness programs are preparing us to meet the financial needs of longer, more active lives.
Secure mobile technology is providing us with tools that make it easier to access and manage our money. And, we continue to develop new tools to protect us against financial fraud.
The goal of financial resilience is not just the absence of financial hardship or just squeaking by. It’s having the means to accomplish your life goals and purpose.
At AARP, we’re working with businesses, individuals, and the financial-services industry to help people prepare financially for their future. By rethinking aging and retirement, we are working together to create opportunities for people to generate, save, and preserve the financial resources they need to enjoy their longer lives.