“Mind the gap!” The voice calls out again,
“mind the gap!” The warning is broadcast thousands of times each day on
London’s ‘Tube,’ the city’s public transportation system. Since its
introduction over 50 years ago, “Mind the gap!” has become a branded slogan for
British tourism, as well as a distinctly familiar phrase that signifies
bringing attention to a problem that may be overlooked in the rush of everyday
life.
Much like the hurried, and typically
distracted, commuters using the London Tube, most of us moving fast and
head-first into older age need to mind the ever-widening gaps in planning a
secure retirement. Most of us give little thought to the uncertainty that our
future selves will navigate during this period of our lives. We assume
that just staying the course of saving a little each year, combined with income
from publicly funded sources, with perhaps a little help from an employer
retirement plan will take care of those years ahead — just as it did for our
parents and grandparents.
Unfortunately for many who hold these
assumptions, there will be surprises ahead: This is not your parent’s
retirement. Here are three surprising gaps that you might not be minding in
your retirement plan.
First, retirement is likely to be far longer
than you think. It’s unlikely to be the vision of a brief period of earned
recreation and relaxation imprinted in our imaginations by media and financial
product guides. Retirement, given today’s life expectancy, is a full one-third
of your adult life—8,000 days. That’s the same amount of
time it took for you to complete your formal education in your teen years, or
the same stretch from the end of your college days up to what some call the
midlife crisis. Hmmm… My bet is you faced a few surprises in those decades. Why
then, would there be stable, predictable waters over the same number of years
in older age?
Retirement planning poses questions about
future goals and objectives. Responses typically include nebulous goals such as
plans “to travel, to volunteer, to spend time with family, and to get to all
those hobbies that were postponed for decades.”
All those activities sound good — for maybe a
year. But, how will you fill 20-plus years? Mind the gap!—the gap between
imagining and planning retirement as a vacation instead of an entirely new life
stage. Other than work and raising children, how many pursuits in your younger
years lasted for decades? Brochure images of beaches, golf, gardening, cooking,
bike riding...will those activities alone happily fill your days for decades?
Second, you are going to live longer than you
planned. This is great news! In fact, retirees today are reported to have
gained a full four more years of life in retirement since 1980. The problem is
your employer’s pension plan, your savings plan, and even the public and
private insurers you may be depending upon did not plan on your good
fortune.
Ironic, isn’t it. Living longer, a longevity
dividend of sorts, is the gap that most people fear —outliving the savings
necessary to support quality living. Or worse, becoming a financial burden to
your adult children.
Unfortunately, there appears to be good reason
to be worried. A recent study conducted by McKinsey shows that
pension systems in 22 countries are unlikely to provide the retirement income
necessary “to replace average earnings.” In fact, in both Canada and the United
States, the gap between life expectancy and the security of receiving mandatory
pension payments to replace average earnings in retirement is nearly a decade.
Mind the gap!
Financial industry-led initiatives such as
the Alliance
for Lifetime Income have been leading the charge to put the
need for a diversity of income sources in retirement on the planning agenda of
individuals and families. Regardless of the products and strategies that may
provide these income streams, the need for lifetime income is critical to mind
the ever-widening lifespan/wealthspan gap.
Third and finally, few plan on social gaps in
retirement. Social connection, and being engaged with others, was easily
achieved at a younger age by simply going to work each day, belonging to
community groups, and participating in activities that typically revolved
around the lives of our children. Mind the gap!
Out of the workplace and with the children
having moved on, staving off the now chronic condition of social isolation
requires reaching out and establishing new sources of connection. Donato
Tramuto, CEO of Tivity Health,
which operates Silver
Sneakers, an exercise and social engagement program available to
nearly 15 million older Americans, noted “the health effects of social isolation
are a public health crisis. It increases the risk of premature death by almost
30%, making it more harmful than obesity or physical inactivity.”
AARP reports that one in three adults over the
age of 50 lack regular companionship. Despite what appears to be an
ever-growing, and global, problem of social isolation, few people consider how
they will remain connected in their advanced years as part of their retirement
plan.
‘Mind the gap’ may be a fun expression
plastered on London souvenir T-shirts and mugs, but who is alerting us to the
new gaps in retirement planning? While we go through our daily lives,
chins up, with the idea that our retirement will be similar to our parents, but
maybe just a little longer, we may unknowingly fall into the growing gap
between what we think retirement will be, and what tomorrow’s retirement
actually demands.
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