70 is the New 65: Why People Are Retiring Later

For decades, the age of 65 has been seen as the hallmark of retirement. It was the magic number when people bid farewell to the workforce and embraced their golden years. But times are changing. Today, more and more individuals are delaying retirement, with 70 quickly becoming the new 65. But why is this happening, and what does it mean for you?

1. Where Did 65 Come From?

The concept of retiring at 65 originated in the late 19th century when Germany introduced the first government-funded pension system. The age of 65 was later adopted by other countries, like the United States, as a practical benchmark. At the time, life expectancy was much lower, and few people lived long enough to claim pensions. While it made sense then, it’s less relevant today as people live longer, healthier lives.

2. Longevity Is Reshaping Retirement

Advancements in healthcare and living conditions mean people are living longer, healthier lives. A 65-year-old today could reasonably expect to live another 20 to 30 years. In our own client base, we’ve witnessed this trend firsthand. For example, one of our clients, at the remarkable age of 94, still drives her own car and plays lawn bowls twice a week! This longevity underscores the need for careful financial management to ensure that savings last through an extended retirement.

3. The Rising Cost of Living

The increasing cost of essentials such as healthcare, housing, and food has made it harder for retirees to sustain their lifestyles without a steady income. Inflation steadily erodes the purchasing power of savings, and pensions are no longer keeping up with real-world expenses. Working a few more years can provide additional income and help safeguard financial stability.

4. The Compounding Power of an Extra Five Years

An extra five years of work can have a massive impact on your retirement savings, especially later in life. Take, for example, a surgeon I recently consulted. At 65, he had accumulated a portfolio of R9 million and planned to retire. However, due to the financial uncertainty brought on by the COVID-19 pandemic, he decided to delay his retirement to age 70. During these five years, thanks to market growth and aggressive contributions, his portfolio grew to almost R20 million.

This growth has completely changed his financial outlook. Today, he can retire comfortably, knowing his savings will provide for him throughout his retirement years. This demonstrates the incredible impact that additional working years can have, particularly when combined with disciplined saving and investing.

Longevity and Financial Planning

Our experience working with clients shows that people are not only living longer but thriving later in life. However, this longer lifespan comes with the need to manage financial affairs carefully. Retirement now spans decades, and it’s crucial to make strategic decisions to ensure that savings, investments, and other assets last.

What Does This Mean for You?

If you’re nearing retirement age, the idea of working until 70 may feel daunting, but it also opens up opportunities:

• Greater Financial Security: Working longer can help you bolster your retirement savings and reduce financial stress.

• Purpose and Fulfilment: Remaining in the workforce can keep you mentally sharp, socially connected, and engaged.

• Strategic Retirement Planning: With careful planning, you can use your extra working years to optimize investments, settle debts, and create a buffer for unexpected expenses.

How to Prepare for a Later Retirement

1. Review Your Financial Plan: Assess your current savings, investment strategies, and expected retirement expenses.

2. Stay Healthy: A healthy lifestyle can make working later in life more feasible and enjoyable.

3. Invest in Skills: Continuous learning keeps you competitive in the workforce and opens up new opportunities.

4. Consider Flexible Work Options: Explore part-time or consultancy roles that allow you to ease into retirement.

   
   

Final Thoughts

The shift from retiring at 65 to 70 is a reflection of our changing world. While it may seem like a challenge, it’s also an opportunity to redefine what retirement looks like. Whether you see yourself working longer out of necessity or desire, the key is to plan intentionally and embrace the possibilities of this new era of retirement.

If you’re unsure about whether your financial plan aligns with this new reality, let’s chat. Together, we can create a strategy tailored to your goals and aspirations.