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The new retirement reality: Should you stay or should you go?

This article was published in the Irish Examiner online, and is available to view here

Picture retirement and you’re likely to conjure thoughts of pension pots, carriage clocks and senior citizens enjoying golfing, gardening, and pottering about. But this may not be the case for much longer.

Policymakers are now challenging this stereotype as they consider increasing the retirement age while health experts say some of us might benefit from postponing retirement indefinitely.

France’s President Macron recently raised the state pension age from 62 to 64, provoking angry mass protests. He argued the move is economically necessary in a country where the average life expectancy is 83. Macron’s economic argument holds true throughout Europe and the developed world, where lifespan is increasing but the pension age has remained unchanged since the beginning of the last century. A German person retires at 67 yet can expect to live to 81. In Ireland and Britain, the average lifespan stands at 82, yet we qualify for a pension at 66.

Mark Ward, a senior research fellow with TILDA, the Irish Longitudinal Study on Ageing, acknowledges there’s a problem.

"An ageing population brings with it a number of challenges, including the issue of financing questions as people live longer past retirement,” he says.
“When the first old age pension act was introduced in Ireland in 1924, the average life expectancy was 57. Most people didn’t even reach pension age. Whereas now people can expect to live for far longer and there are fewer younger workers to support them."

This focus on finances makes sense. After all, the state must have the funds to look after us in our old age. But money shouldn’t be the only factor that determines when we retire.

Gal Wettstein, a senior research economist at the Centre for Retirement Research at Boston College in the US says our health should be just as significant a factor. He believes that rather than concentrating on our increasing lifespan, we should focus on our healthspan, defined as the number of years we can expect to remain healthy and disability-free.

A study he carried out in 2021 found that Americans who were healthy at 50 could expect another 23 more years free of disability. This suggested that the average person’s maximum working life could continue to age 73.

“It’s important to account for how long people can work when designing retirement systems,” he says. “We have to take into account that a meaningful part of the workforce cannot physically be expected to work past a certain age and some way of supporting these people is needed. It’s all to do with health. I do not think we would have public retirement systems if there were no health constraints to work.”

Just as our lifespan was shorter when old age pensions were first introduced, so too were our healthspans. “Medical advances, improved diets and healthier lifestyles have meant that people remain healthy and capable of contributing to their communities for longer,” says Ward.

These changes could be reflected in public policy. “When considering retirement age, we should be mindful that the nature of ageing has changed dramatically,” says Ward. 

“Far from viewing retirement as a time of decline and ill-health, it’s now seen by many as a time of continued growth and enjoyment, when individuals have the opportunity to do things that are important to them, whether that’s spending time with family and friends, doing something creative or active or continuing to work. However, policy shouldn’t focus exclusively on economic considerations but should reflect the aspirations of a society."

“The reaction to raising the retirement age in France partly reflects this disconnect between budgetary demands on one side and the desires of the population the government is supposed to serve on the other.”

Revising expectations

Laura Farrell, CEO of the Retirement Planning Council (RPC), says people are revising their expectations.
“Many no longer see retirement as taking a step back,” she says. “A recent RPC survey found that half of the people over 50 intended to continue working past retirement in some shape or form. It’s a changing landscape. I don’t think retirement will be called retirement for much longer.”

A report published by TILDA in 2019 shows this is already happening. Some 17% of men and 8% of women do some form of paid work beyond retirement, working an average of 22.7 hours a week. Ward emphasises that not everyone can or wants to do this. “There are lots of people who don’t want to stop working just because they have reached an arbitrary age,” he says. “But there are also many who do want to retire and don’t want to be told that they have to keep working.”

The type of work people do is a key consideration here, with significant differences between desk jobs and jobs in sectors like construction.

“In many sectors, there’s no reason why someone who is cognitively and physically able to work – and wants to do so – should be told they no longer can,” says Ward. “On the other hand, there are many physically hazardous occupations where it is potentially damaging, if not dangerous, to expect an older adult to continue working in it.”

We should also factor in the impact a job has on an individual’s psychological wellbeing. “Many people derive a significant portion of their self-worth from their work,” says Ward. “While for others, work can be a drudgery that harms their sense of self. The former can derive a sense of purpose from working while the latter may work solely because of necessity.”

Loss of social connectivity

There are proven benefits to remaining in the workplace, provided that people can work and gain satisfaction from doing so. A 2015 American study found that those who worked past 65 had better outcomes than those who didn’t. They were three times more likely to report being in good health and half as likely to have serious health problems like cancer and heart disease.

A 2006 study by the US National Bureau of Economic Research found that people started to decline mentally and physically post-retirement. These effects were attributed to lifestyle changes including decreased physical activity and social interaction. “There’s a wide body of research suggesting that physical and mental health can be negatively impacted by retirement,” says Farrell. “Retiring can lead to a significant loss in social connectivity, a decrease in physical activity and challenges to one’s sense of identity, all of which can affect our health. That’s why it’s important to take a holistic approach to retirement so that the next stage of life can be a sustainable and fulfilling one.”

We tend to think that older people don’t have the cognitive function to perform in a busy workplace past a certain age. But research proves otherwise. A 2015 American study shows that while certain parts of the brain start to lose volume from the age of 45, other areas compensate. For example, crystallised intelligence (the accumulated knowledge that can be applied to new situations) and social cognition (behaving appropriately in interpersonal situations) continue to improve for decades. In fact, they seem to be strengthened by staying in the workforce.

Getting hours back

Due to their shorter lifespan than women, it’s sometimes argued that males should retire before females. This is too simplistic, according to Wettstein. “The decision to retire is based on so many dimensions, not just life expectancy,” he says. “Having a lower life expectancy might induce men to retire earlier. However, they also tend to have higher earnings, which might lead them to work longer to maintain their standard of living. It’s also typically the case that men and women share households, so the decision of when each member of the household retires is rarely made in isolation.”

When the concept of a retirement age was first introduced, it was largely a symbolic offering accessible to those lucky enough to live to old age. However, the longer we live, the more it becomes a hot topic. “There is so much for people to weigh up when deciding on retirement,” says Farrell. “We think it’s all about money and having enough of it to fund our quality of life but once we tease it out, we realise there’s a lot more involved. When we stop working, we get back about 50 hours a week and we lose up to 80% of our social interaction. What will we do with that time when we have fewer people to interact with?

“Most of us don’t see ourselves hanging up our boots and heading for the golf course. We want to continue being productive and engaged. This means we should be designing the next phase of our life so that we retain our sense of purpose and control over our lives into the future.”

Majority want to 'retire sooner'

Research carried out by The Irish Longitudinal Study on Ageing (TILDA) in 2019 paints a mixed picture of Irish people’s plans for their retirement. More than 8,000 people over 50 participated in its Embracing Retirement report, which found that one in four had no plans to retire, three out of five planned to retire before 68 and one in seven didn’t know when they would stop working.

“Some had very firm plans around retirement and others didn’t,” says TILDA senior research fellow Mark Ward. “A lot of this reflects the type of job they were in, with public sector employees having plans to retire earlier than those in the private sector.”

However, one statistic stood out for Ward. “Less than 6% of people said they planned to retire after the age of 67,” he says. “This shows that the vast majority of people have a clear preference to retire sooner rather than later.”

Changes made to the State pension system last year encourage employees to stay in the workplace for longer. While the State pension age remained at 66, from January 2024 onwards, people will have the option to continue working until the age of 70 in return for higher pension payments.

Retirement Planning Council CEO Laura Farrell would like to see the element of choice prioritised. “We are seeing that a growing number of people are coming out of retirement and returning to work due to the rising cost of living,” she says. “It’s a necessity for them rather than a choice. Ideally, we would like for everyone to have a choice.”

Ward agrees. “Not everyone aged 66 is the same in terms of their health and wellbeing. Nor in terms of what they want to do with their lives or how they want to spend their time,” he says.

“Lots of people aged 66 are incredibly active, while others may have conditions that limit their activity. Given these differences, telling people that they either have to stop working or continue working longer can’t possibly suit everyone.”