The UK and US have given it an entire week. The rest of the world also needs to make time for planning financially secure and healthy retirement.
Increases in longevity have gifted humanity with an extended period of life. Rather than a time to slow down, a majority of people globally think of retirement as an active phase of life.
When questioned about their aspirations for the 2019 global Aegon Retirement Readiness survey, the most frequently cited were traveling (60 percent), spending more time with friends and family (57 percent), and pursing new hobbies (49 percent).
These are some of the findings of the report The New Social Contract: Empowering individuals in a transitioning world, published by the Aegon Center for Longevity and Retirement (ACLR). The figures are averages based on a survey of 14,400 workers and 1,600 retired people across 15 countries spanning Europe, the Americas, Asia and Australia.
Willing but not ready
But wanting and being able to realize retirement aspirations can be poles apart. The two most often cited retirement concerns among people globally are declining physical health (50 percent) and running out of money (40 percent), according to findings from Aegon's research.
National Retirement Security Week
The US Senate has sought to tackle the lack of retirement readiness in the United States by backing National Retirement Security Week. Held annually in the third week of October, the week involves various initiatives by employers and public bodies to get individuals to think about their retirement goals and encourage them to save to finance their planned lifestyle after they stop work.
A lot of the emphasis is put on participating in employer-sponsored retirement savings plans. But only 17 percent of employers are very confident that their employees will be able to achieve a financially secure retirement, according to a new report, Employers: The Retirement Security Challenge, published by Transamerica Center for Retirement Studies (TCRS), a nonprofit sister organization of ACLR. The report states this is an alarming statistic given the societal role employers play in helping workers financially prepare for older age.
"As people live longer, we need to rethink the amount of time spent in the workforce and in retirement. Mathematically, it is challenging for workers to spend 30 to 40 years in the workforce and save enough for a retirement that could easily last 20, 30 or more years," says Catherine Collinson, CEO and president of Transamerica Institute and TCRS. "Most workers want and need to extend their working lives into older age with the flexibility to transition into retirement. However, their ability to do so is highly dependent on their employers."
The survey finds that employers are aware of the need among employees to work beyond traditional retirement age, but few have updated their business practices to support them.
Pension Awareness Campaign
In the UK, the Pension Awareness Campaign is backed by industry organization Pension Geeks. In September, the campaign started a a nationwide, week-long tour in a minibus from Aegon's UK headquarters in Edinburgh. Stopping at several locations, members of the public were welcomed onboard to get free guidance from a team of advisers on their pensions and retirement preparations.
These initiatives in the US and UK serve to highlight that while professional advice is available, the onus to plan for retirement is increasingly on the individual.
To help address the situation on a global level, the ACLR sets out Five Fundamentals for Retirement Readiness that define steps people can and should take to help ensure that they are on track for a comfortable retirement. They involve different aspects of saving, planning, and preparing for longer lives and older age.
The best route to retirement readiness is starting to save as early as possible and becoming a "habitual saver" who always saves for retirement. Only 39 percent of workers globally say they are habitual savers.
Only 16 percent of workers globally have a written plan for retirement. Fewer than half of workers are currently factoring future healthcare expenses into their retirement savings needs
Unforeseen circumstances can have a catastrophic impact on household finances. Globally, only 35 percent of workers have a backup plan to provide an income in the event they are unable to work before they reach their planned retirement age.
Living healthily can help mitigate decline in older age and associated healthcare costs. When asked which healthy behaviors apply to them, people globally most often cite eating healthily and avoiding harmful behaviors (both 60 percent).
People must commit themselves to continuing education to keep their job skills up to date and relevant and to learn how to make informed choices in their retirement planning. Financial literacy is a compelling example of where improvement is needed. The survey found that only 30 percent of people globally could correctly answer all of the "Big Three" financial literacy questions developed by Drs. Annamaria Lusardi and Olivia Mitchell that test knowledge of compounding interest, inflation, and risk diversification.