The concept of retirement is rapidly changing. As people live longer, retirement will become a more active life stage, with more people looking to blend work and leisure. But not all countries are acting on this global trend.
Governments around the world are either contemplating or have started implementing reforms, such as increasing the age at which people become eligible for government retirement benefits. Although people's attitudes toward those changes vary across the globe, there is a common and growing appreciation that a flexible retirement offers an opportunity to stay active, engaged, and productive. 51 percent of all workers now expect to retire at age 65 or later or not at all.
The need for change is increasing and urgent. The life expectancy at birth in OECD countries now averages over 80 years, and the percentage of a person's life spent in good health ("health expectancy") is increasing. As a result, people are physically and mentally capable of remaining in the workforce longer than their parents' generation.
In many countries, the working-age population is beginning to shrink as the number of people leaving the workforce exceeds those joining. Employers will need to employ workers longer. However people's ability to continue working depends on employers recognizing the value of retaining workers past traditional retirement age and implementing practices that enable them to continue working and transition into retirement in a more flexible way.
Life expectancy is increasing around the world. From 1970 to 2010, life expectancy at birth increased 11.1 years for men and 12.1 years for women. As people live longer, their ability to work to an older age increases. People should no longer be limited by the notion of retiring fully at age 60 or 65.
Retirement expectations shaped by government policies
People's expectations regarding when and how they retire is often shaped by government policies. For example, the survey found that 44 percent of workers in Spain expect to retire the year they turn 65; however, pension reforms agreed to in 2011 will gradually increase retirement age from 65 to 67 over the period 2013-2027. In China, the official retirement age is 50 for women and 60 for men, which explains why nine out of 10 survey respondents in that country expect to retire before age 65. (Note: The Chinese government is pursuing reforms to increase its statutory retirement age.)
The mindset of working beyond traditional retirement age varies greatly around the world. In Japan, 43 percent of the survey respondents aspire to continue working past retirement, whereas in France only 15 percent are considering doing that.
Again, this could be partly explained by public policy: Since 2013, Japanese employers have been legally required to adopt a policy that encourages workers to keep working. The most common approach to date has been the so-called "continued employment system" in which a worker approaching the retirement age is offered a special contract with more flexible terms.
Flexible transition into retirement
Globally, the survey found that 51 percent of all workers now expect to retire at age 65 or later, or not at all. Additionally, 55 percent of workers age 55 and older envision a flexible transition into retirement, with an even higher proportion of younger workers envisioning this. Reasons for doing so are varied. Work can also provide other benefits such as maintaining social relationships.
Reasons to keep working after retirement
Which, if any, of the following are important reasons for you continuing to work to some extent in retirement? – Base: Not fully retired and envision working (n=8,195)
How workers can successfully extend their working lives and retire at an older age is a complex issue. Workers in jobs involving manual labor may not be physically able to continue in their profession. Others may encounter biases against older workers in the workplace.
Some employers may perceive older workers to be more expensive and/or less productive. On the other hand, some companies may value older workers' expertise, experience, judgment, institutional knowledge, and good interpersonal skills. Employers play an all-critical role in workers' successfully realizing their vision of a flexible retirement.
Employers may be overlooking the advantage of creating a working environment that is attractive to workers who continue to add value as they approach retirement. Workers indicate that their employers are doing little to help them phase into retirement.
The survey found that only 27 percent of workers age 55 and older say their employers offer the option to shift from full-time to part-time working arrangements as they transition into retirement.
What do employers offer to support transition into retirement?
Which, if any, of the following services does your employer offer to help employees phase into retirement? – Base: Not fully retired (14,400)
Few employers offer retraining
In a changing world, the opportunity for training and acquiring new skills is particularly important for older workers who want to work past normal retirement age. However, only nine percent of the workers age 55 and older say their employer offers retraining opportunities to help them phase into retirement.
Some workers may want to continue working in their current role, while others may wish to explore new or less demanding opportunities with their employer. Having the skills necessary to take advantage of such opportunities can help workers remain in employment for a longer period of time.
Fifty percent of survey respondents who are not fully retired think that their employer doesn't offer enough information and support to prepare for retirement. Notably, this level of agreement is highest in Spain, Poland, Hungary and Japan – the four countries where workers feel least positive about retirement generally.
Older workers more loyal
Despite the lack of pre-retirement assistance from their employers, older workers are nevertheless loyal. Almost half (48 percent) of workers age 55 and older say they feel a strong sense of belonging to their employer and 73 percent say they plan to work with their current employer until they retire if possible. Just 17 percent of the workers age 55 and older are considering looking for a new job in the next 12 months, compared to 37 percent of workers aged 25-34.
Employers may therefore get a greater return on investment when offering training to older workers. However, again it should be underscored that few older workers indicate their employers have business practices in place to support their transition into retirement.
Declining working-age population
Employers face risks of being negatively affected by population aging. For decades, employers have shaped their business practices predicated on the assumption that their workers will retire at a certain age. What employers may not yet realize is that the percentage of working-age individuals relative to the overall population is declining.
When Baby Boomers and older workers retire, there will be fewer workers available to take their places. Employers should be better equipped with succession plans and the necessary management tools to help them avoid disruptions within their workforce, which would also enable them to facilitate workers' vision of the new flexible retirement.
A clear strategy for promoting the new flexible retirement can create a win-win situation for workers, employers, and governments to address increases in longevity and mitigate the challenges created by population aging. Aegon Center for Longevity and Retirement sets forth the following recommendations in support of the new flexible retirement:
- Employers should conduct a review to see how changing demographics will affect their workforce and assess the value of retaining older workers as a way to maintain institutional knowledge and address possible labor shortages in the future.
- Governments and employers can increase workers' awareness of the opportunities for continuing to work past the traditional retirement age. Education through public service campaigns and workplace communications can help workers to make more informed personal and financial decisions that could lead to a better transition into retirement.
- Government reforms to social security benefits can influence workers' behavior and attitudes to retirement. Examples include increasing the age at which government retirement benefits begin, enhanced retirement benefits for those deferring their entitlements, and training programs to help older workers gain new skills.
- Employers can and should promote an aging-friendly work environment and culture designed such that workers of all ages can thrive. Examples include offering part-time, flexible work schedules and enabling shifts to less demanding positions.
- Governments and employers should identify and remove disincentives in workplace retirement plans to working past a fixed retirement age. Examples include the ability to start receiving retirement benefits at retirement age while continuing to work, the ability to continue to either contribute to or earn service credit in an employer plan past retirement age and the opportunity to move into a less demanding role without impacting retirement benefits.
- Employers can establish intergenerational employee resource groups and work teams to help breakdown stereotypes relating to age, young and old, as well as to take advantage of the different skills and perspectives each generation brings to a project. Such groups also help in transferring knowledge and skills within the workplace.
- Employers can provide access to training for workers of all ages, including older workers,to help them keep their job skills up-to-date and relevant.
- Workers approaching the minimum retirement age should consider their goals and options by: Seeking financial advice regarding their expected retirement benefits and how they can best manage their income in retirement to last their lifetime; visiting government websites to check social security benefits and what incentives or opportunities might be in place for those wishing to work longer; and consulting with their employer regarding opportunities to continue working past retirement age either in the same or more flexible work arrangements.
Country profiles on flexible retirement
Below you will find country-specific insights on flexible retirement, combining data from the Aegon Retirement Readiness Survey 2015, with key indicators from other sources.