We’re living longer, maybe even for 100 years. This means many of us need to work longer to sustain eventual retirement. But how can we do that in a world where the nature of work is changing?
We have become aware of a fascinating book called The 100 Year Life by Lynda Gratton and Andrew Scott.
What we find intriguing about the book is that although getting our finances on track for a long and happy life is key, it is far from being our only and most important goal. There are other crucial ingredients to a long and happy life such as family, friendships and mental and physical health.
Traditionally, according to Gratton and Scott, we approach life with a three-stage model. The first stage of your life is spent being educated, the second stage is your working career and the third phase, retirement. We have three distinct transitions in this model.
With us now living longer, the three-stage model is being brought into question as the middle phase is becoming longer and longer, mostly in order for us to be able to accumulate enough financial resources for retirement. This working phase is and will take its toll on us, not to mention tire us and, for many, bore us.
The authors suggest there is going to be a shift to a multi-stage model where you may have a few career transitions in your lifetime punctuated with periods of downtime and periods of re-skilling.
More years on the hamster wheel
One thing we know is that we will all need to work longer to sustain a 100-year life cycle and, moving forward, it won’t be uncommon for people to be working well into their mid 70s or 80s. The working phase of the three-stage model will just not be sustainable unless your working life is more varied. In a rapidly changing job market, the need for re-learning and re-skilling will become far greater than ever before. Therefore, the need to invest in oneself and be able to handle life transitions and change will become paramount. Taking periods of time out and enjoying leisure activities will become even more important in order to get the balance right, so that a longer working life is sustainable.
You may have a phase in your life where you are working longer hours and building your career but later in life you will transition into another phase of working life. New skills will need to be learnt and new networks established.
We are already seeing it in the gig economy where retirees are working from home and have essentially re-invested in themselves and are contracting out their services on a flexible basis that suits their lifestyle.
We are in the midst of a transition for which few of us are prepared. If we are able to get it right, a longer lifetime will be a gift but if we fail to prepare it could be the exact opposite, a curse. No matter how old you are today, where you live or whoever you are, you need to think about the decisions you need to take today to make the most of a longer life. These decisions are not only financial decisions but encompass life decisions too.
Living a longer life is often associated with poor health, escalating medical costs and potential poverty. As financial planners we discuss longevity and the impact this has on financial planning. How do we get your money to last longer? Do you need to work longer, push out retirement, save more aggressively or live on less and cut back during your retirement? None of these sound very appealing, do they?
Rather think of the opportunities that a longer life could provide you. The gift you are receiving is time and how you choose to use and structure that time is at the heart of the response to living longer. Perhaps you want to spend more time with your family, seek out new life experiences or take time to give back and help others. Preparing for a 100-year life is about more than just shoring up the finances. You can’t have a long and financially successful career if your skills, health and relationships are depleted. Similarly, without sound finances, you will not be able to invest in those crucial non-financial matters.
Awesome article. Thank you!