People are living longer, and daily life is getting more expensive. It may be time to rethink the timeline for leaving the workforce.
Handing in your proverbial badge as a sexagenarian has been the goal for many workers around the world: turning 65 would open a golden portal to retirement. Yet increasingly, the idea of stepping away from the workforce in your 60s doesn't seem realistic – or even sensible – for many people, especially now. Some major financial figureheads agree.
In March, investment-management firm BlackRock released its annual letter to the company's investors. Its CEO Larry Fink sounded a warning for workers hoping to retire – comfortably and financially secure – in their 60s. As global life expectancy grows, social safety nets fray and cost of living spikes, Fink warned that retirement at age 65 won't be possible for many, even most, people.
“[Retirement] is a much harder proposition than it was 30 years ago,” wrote Fink. “And it'll be a much harder proposition 30 years from now.”
From 2000 to 2019, global life expectancy increased from 67 years to 73. By 2050, the UN expects one in six people worldwide will be aged 65 or older. And as the population ages, many countries will soon reach a point where more people are leaving the workforce than are entering it: in the UK, that point may be reached by 2029; in Brazil, by 2035; in India, by 2048; and in the US, by 2053.
“Life expectancy has been continuing to go up since the mid-1850s in the UK,” says Rebecca Sear, professor of population and health at the London School of Hygiene and Tropical Medicine. “But the retirement age hasn't changed that much.”
As both the health and economic landscape has changed dramatically, is retirement at 65 an entirely unrealistic goal in a modern world?
An arbitrary standard?
Not only has the target retirement age not changed in step with modern circumstances, but it's also “unclear why the mid-60s became such a focal age for retirement”, says Gal Wettstein, senior research economist at the Center for Retirement Research at Boston College. In ways, it was a “rough judgement” intended to usher people out of the workforce towards the very end of their lives.
Yet many government programmes continue to use it as a standard. In the US, Medicare, the federal healthcare insurance program, is currently available only to adults aged 65 and older (there are exceptions for younger people with disabilities). Americans become eligible to receive their full Social Security benefits at age 67, roughly the same age that UK citizens can claim their universal State Pensions.
In the mid-20th Century, when many of these programmes were enacted, life expectancy was significantly shorter: in the UK, for instance, it was roughly 66 years for men and 71 years for women. “If you're basic about it, [UK citizens would] only spend 8% or 10% of their life on a pension,” says Chris Parry, principal lecturer in finance at Cardiff Metropolitan University.
Now, however, “our lives are getting longer, we're being healthier longer into late middle age and early elderly”, he says. “There are many people wandering now in their early and mid-80s who are healthy and enjoy a very active life – both physically and mentally.”
Changing wealth patterns
In short, government stipends weren't designed to support people their in 80s and 90s, and haven't been updated to do so. The policies that were once established to support retired workers for the remainder of their lives are no longer calibrated to modern circumstances.
And while some people supplement their government benefits with investment vehicles intended for retirement savings, many former workers don't have enough – or any – personal savings to fall back on. Plus, as cost of living rises in an inflation economy, any amassed savings simply isn't stretching as far.
Additionally, the generational wealth that once ensured younger people would have a financial cushion later in life is becoming a thing of the past. “Resources have basically flowed down generations, from grandparents to parents to children,” says Sear. “Now, we divert resources up to the generations. For the first time in human history, we have wealth flows now going from the parent generation up to the grandparent generation.”
This lack of a traditional safety net is necessitating many workers across the globe stay in their jobs beyond 65 to generate enough savings to retire. June 2023 data from American insurance company Northwestern Mutual showed US workers believe the “magic number” for retirement savings is nearly $1.3m (£1.03m) – wealth that most people cannot accumulate by their 60s, and doesn't scratch the surface of what a government pension can provide.
For BlackRock's Fink, the answer to a comfortable modern retirement involves investing more aggressively beginning at a younger age – and working past the age of 65. Some governments are already recognising 65 as an outdated goal; the UK pension age is already set to rise from 66 to 67 between May 2026 and March 2028; after 2044, it could rise to 68.
Some experts, including Parry, agree retirement in one's 60s is now more of a dream than a reality. When it comes to retirement, “I think 75 is the new 65”, he says.
