The Upside of Aging (Part 3): Funding a Retirement that Could Last 40 Years

Retirement has changed. It’s no longer seen as the beginning of old age, but rather, the start of a new phase. It’s become a time for new studies and passions. A time to be active and engaged, and to make positive contributions to society. This may be the first time in history where someone spends more years in retirement than in a traditional working career.

Contributors to the new book, The Upside of Aging, cover a range of challenges and opportunities associated with an aging population that is living longer, with a focus on making those extra years healthier, more active and more productive. My chapter focuses on an important challenge (and opportunity) as well, financial security – and what it takes to fund a retirement that could last 20, 30, even 40 years.

Many workers have built the financial means to pursue their dreams in older age. But too many have not, having failed to embrace the notion of self-sufficiency, to live within their means or to make savings a priority. Fewer than 4 in 10 pre-retiree households (age 55 to 70 and not retired) have financial assets of at least $100,000[1], an amount that would generate guaranteed lifetime income of around $400 per month.

Said another way, most workers have substantially under-saved.

While the challenge is significant, it’s not insurmountable. A lot of crucial work is already in progress. Through action, and an intensified focus on better retirement outcomes, we can tackle this very fixable issue.

A plan of action

I believe that over the next 20 years, we can get 90 percent of workers on track to replace 85 percent of their pre-retirement income. The defined contribution retirement system (DC) gives us the foundation we need for success. DC is a proven vehicle for American workers to save – with $5.9 trillion of assets as of Dec. 31, 2013.[2]

The key going forward is to take what’s working and make it work better. That will require the key stakeholders in retirement readiness to step up and take a role. My chapter in The Upside of Aging outlines several suggestions for each. I’ll focus here on my top recommendations:

WorkersMake a plan. Get into the savings habit early in your career. If your employer offers a retirement savings plan, contribute to it. Curb some of your passion for spending and develop a passion to save.

Employers – Recognize that physically and financially well employees are productive employees. Think of wellness programs and retirement plans as an investment, not a cost. Encourage employees to save for retirement through a meaningful matching contribution.

Financial advisors – Provide workers more holistic financial planning. Help your clients prioritize competing demands on financial resources over their lifetime, and make sure they protect against the risks that can derail financial security, such as death or disability.

Retirement plan service providers – Make plan enrollment easy and understandable. Expand the array of tools, guidance and education, to help influence worker behavior. Counsel plan sponsors on using “auto” features in a more optimal way (such as higher default rates and use of automatic escalation) to drive better participant outcomes.

Investment managers – Develop new outcome-oriented products that address the four key investment risks for retirees: inflation, market volatility, income and longevity.

Policy makers – Take action to encourage businesses, especially small and medium-sized organizations, to form new retirement plans for their employees. Champion financial literacy. Fix the Social Security system – people are relying on it for at least some portion of their income in retirement.

Perhaps as much as anything, we need to change some mindsets. There’s been too much focus on what isn’t working in the retirement system and not enough focus on what is. And not enough focus on the benefits of having financially secure seniors, who can continue to contribute to society through active community involvement, entrepreneurship and mentoring.

I’ll close with an insight from the book’s introduction: “A massive demographic shift is upon us and it’s changing our world. We can accept it, embrace it, and capitalize on it – or ignore it at our peril.”



[1] The LIMRA Retirement Study, “The Pre-Retiree Market: Surveying the Landscape,” 2012.

[2] Investment Company Institute, March 2014 –