What Does Retirement Look Like in the “Age of Longevity”?

Interview with Andrew Scott

In the coming years, a person’s ability to deal with change and transition, as well as the willingness to reinvent oneself, will be key to enjoying a longer life, says Andrew Scott, a professor of economics at the London Business School.

Douglas Goldstein: I am very excited to have on, The Goldstein on Gelt Show, Andrew Scott, who is a professor of economics at the London Business School.

He recently wrote a book with Lynda Gratton called The 100-Year Life: Living and Working in an Age of Longevity. Why 100 years?

Best Practice Life Expectancy Has Increased

Andrew Scott: If you look at life expectancy data, certainly in the last 150 years, something they call “best practice life expectancy” has increased every decade, by two or three years.

What that means is every generation’s living about 10 years longer than the past generation, which comes as a surprise to many people.

The consequence is that basically, children born today have a really good chance, a 43% chance, of living to 103, or 104, so you need to prepare for this.

Douglas Goldstein: There are obviously a number of issues, like medical issues and social issues, but the topic for today is going to be practical issues, in terms of supporting it because presumably, governments won’t be able to keep paying people out through decades of retirement.

What does the future look like for long livers?

What Does the Future Look like for Long Livers?

Andrew Scott: That’s the key thing.

We argue in the book that we saw in the 20^th century a three-stage life emerge, of education, work, and retirement, and that cannot be stretched out to survive, if you’re living to 100 years, mainly because you want to try and have a reasonable hope of financing a decent pension.

Millennials today will probably have to work until they’re 80, and a 60-year career just seems impossible.

We think they’re going to see a big change in life, and we’re already beginning to see that.

You are seeing people in their 20s behave very differently from past generations. You are seeing people when they retire say, “Okay, what’s the job I’m going to do now?”

You are seeing a whole different structuring of retirement into almost three stages.

One, where you are still working, but not as hard as you used to, one where you are fit and healthy, and you travel and have fun, and then something that looks a bit more like the traditional concept of old age, where you’re physically frail and restricted.

Douglas Goldstein: People who began planning for retirement, assuming they would retire at let’s say 65, 70, and then die some time reasonably later, are now are listening to this and discovering they may not. What changes should they be making right now?

Andrew Scott: It’s complicated. Of course, if you’re 60, your life expectancy is still probably high 80s, whereas if you’re 20, it’s 100.

The challenge, of course, is very different for different generations.

What you are basically finding is a lot of people are still trying to find some form of employment.

Often that employment is almost fun. It’s like doing something that brings in some money to cover your expenses, but it’s not really about building up your assets; it’s about maintaining your assets but also keeping active.

There’s a lot of evidence that suggests that within reason, the longer you work and are active, the longer you live as well.

Douglas Goldstein: Interesting what you’re saying, because there is certainly a push on the other side.

People these days are talking about universal guaranteed income because the robots and the computers are coming, and there’s not going to be any jobs, and they’re actually referring to the jobs that we were normally planning to get for younger people.

If you’re going to add in hundreds of millions of people who haven’t decided to retire because they’re planning to live so long, I don’t really see how this is going to work out.

It was getting worse according to some economists, and now this is adding insult to injury.

Technology and the Future of Work

Andrew Scott: Yes, as an economist I have a slight different view on technology, which is that if people carry on working and spending, that creates jobs in itself.

It’s far better for people to be productive for longer in the economy, than not productive, because then you have to raise taxes and that then makes things worse for everyone.

I somewhat disagree, but I think what is interesting or really challenging of course, is that if you start work at 20 or say you’re in your mid-40s, you can pick up another 30 years of work to go. I don’t want to pressure your listeners, but what that actually means is they’ve got more work to go than they’ve already done.

If you think about the technology that’s coming along, you can see that people are going to have to really re-invest in skills.

Our take on what makes for a good long life is you’ve got to think of four different assets and one of them is financial.

Of course, you have to look after your finances if you’re living for longer, but there’s three other assets that are non-financial, which you’ve got to keep an eye on all the time.

One of those is your productive assets, your skills and knowledge, which I don’t think in a 100-year life, you can survive on what you learned at 20.

You’re going to have to really go back in a major way and relearn.

The second important asset we talk about is vitality assets, which are your health and physical fitness, as well as your close friends and relationships, because they are really valuable.

They’re the things that make for a good life, and you’ve got to keep investing in those. If you work for too long too hard, they’re going to deteriorate.

The fourth one we stress, which we think hasn’t been very important in a three-stage life, a stage of 70 years, but will become important in longer lives, is what we call “transformational assets.”

That’s your ability to deal with change and transition, to be competent enough to reinvent yourself and still cling onto who you are.

Yes, our view of life is that if you want to prepare for this longevity, you need to have all four of those assets.

In a three-stage life, people have said, “I work and that accumulates my savings for a pension,” but pensions are very much a three-stage view of life.

You’re going to need money to help fund you through mid-career breaks, perhaps from retraining or perhaps if you lose your job to technology.

You’re going to have to think about life in a much more complicated way. The key point is we can’t follow in our parents’ footsteps because we have a longevity that’s greater than theirs.

We have to be very aware of doing things differently and keep thinking of these four different assets, and making sure of getting the right balance across all four.

Douglas Goldstein: I’m not really sure if I should be feeling optimistic and excited, or pessimistic and scared.

Frankly, as I’m thinking about this, you listed four assets that people need: money, which is something that I feel comfortable dealing with.

Then you mentioned you need productive assets, which are the skills and knowledge that can actually help you to maintain yourself financially.

You need vitality and you need the ability to deal with change. These are new ideas.

This is not something that people have today. How can people develop this in order to protect themselves for tomorrow?

Andrew Scott: This is the trouble. When life goes through changes, you need to experiment. Of course, no one’s lived deliberately a 100-year life, so this is new.

The 20^th century saw life expectancy extend to 70 and we created some new stages of life.

We created teenagers and we created pensions. They didn’t exist before; previously you just had children or adults.

It’s interesting that with teenagers, it took about 60 years for the concept of teenagers to settle down into what it is.

Douglas Goldstein: And a lot of people want to put them back in a box, so okay.

Andrew Scott: Exactly. I think you can see now massive experimentation of people in their 20s, because the average age of marriage, in the West, is now early 30s, not early 20s.

In the U.K. now, you’re more likely to have a child, as a woman, if you are in your 40s than you are if you’re less than 20.

We are seeing the time at which people buy houses or start careers, all shift.

There’s a big experimentation happening, and so you need to look around and see what people are doing differently from past generations.

Of course, the more you look, the more you see people in their 40s and 50s giving up one career and retraining and/or taking time out to spend time with family, and then re-launch themselves differently.

You need to prepare financially for that, and you also need to prepare psychologically because as we get older, there’s a great tendency to be stuck in familiar ways.

If you want to transform or change or learn new things, you have to widen your network and expose yourself to new ideas and new people, and that can be uncomfortable.

Douglas Goldstein: Back on the scary end of it.

It sounds to me like all of the people who are not preparing for this, those very people who are in fact not listening to this interview on The Goldstein on Gelt Show, would probably say, “Well, this is the government’s problem. They’ll figure it out.”

I haven’t heard any governments really talking about this. Is there any public policy discussion that’s going to set people up for a more secure future?

Is There Any Public Policy Discussion That Will Set People up for a More Secure Future?

Andrew Scott: No, and there’s all sorts of issues and challenges here because there’s also great inequality in life expectancy.

Those with better income are seeing fantastic improvements in life expectancy.

Those at the bottom end are not seeing it. The main response of governments has been to try and increase retirement age slowly. But of course, if those at the bottom are living longer and you increase retirement age, you may just eliminate retirement for that group.

I think what you are beginning to see slowly, and it will be a slow process, is that not all of us today will live to 100; it’s the children coming through who have that as a realistic expectation.

You are beginning to see governments provide greater flexibility.

The concept of retirement as a fixed idea, that everyone at a certain age comes to a hard stop to work, is slowly beginning to change.

You are seeing changes in the tax law, you’re seeing changes in retirement policy, which enable greater flexibility, and I think that’s going to be a key part of how we do respond to it.

You are also seeing some very interesting commercial changes.

You’re seeing a lot of activities for people in their 50s and 60s to retrain. I’ve seen all sorts of educational initiatives, whether it be MOOCs (massive open online courses) or online courses to provide that.

I’m seeing actual companies setting up and offering gap years for people in their 50s and 60s, or for retraining facilities, so you’re beginning to see some response.

I think the big problem is that it’s going to be up to the individual to make the choices so that they can benefit both from a longer life and those years of longer life.

Relying upon social role models or the government is not going to be a good way because governments will be behind both.

Douglas Goldstein: Amen to that in many, many areas.

I certainly think people should take a look at the book, The 100-Year Life to learn about the issue and then to begin to prepare themselves and their children for a much longer and, hopefully, a much more productive life.

Andrew, we are just about out of time, but in the last few seconds, tell me how can people follow you and follow your work?

How to Follow Andrew Scott

Andrew Scott: The website for the book is www.100yearlife.com, 100 being the number. You can follow me on Twitter on @ajslondon1 but let me just finish by saying this is really good news.

What the data tells us is on average, we’re living for longer and we’re healthier for longer. That comes with problems but that’s the punchline.

Douglas Goldstein: Thanks for the good news. Professor Andrew Scott, thanks so much for joining us.