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Why save for retirement if you don’t intend to retire?

Financial services need to be more flexible if they are to stay relevant.

It has not even been 11 years since the first iPhone was released. Netflix only started streaming video a decade ago. Twitter was launched in 2006.

In the context of human history these are incredibly recent developments, yet they have become pervasive in that short space of time. They illustrate how the way we live has changed dramatically since the start of the millennium.

Technology has changed the global environment, and it has changed how we work and what we expect from employment. Our expectations are dramatically different today compared to what they were 15 or 20 years ago.

“The nine-to-five work week is a relic of the 20th Century,” says Dion Chang from Flux Trends. “Who hasn’t answered an email on the smartphone? We are all remote workers.”

The generations entering the workforce today have a quite-different idea about how their careers are going to look. Having grown up with the internet, social media and intelligent personal assistants as part of their every day lives, they have a perspective that would not have been shared by their parents and grandparents at the same age.

The old template of work, which Chang calls the ‘linear way of living’, is foreign to them. They are not going to follow a path of completing school, going to university, getting a job, working until they retire and then putting their feet up.

“They expect to zigzag through their working life,” Chang says. “In a digital era, skills become redundant quickly, and they will have to upskill; do something different.”

Mini-retirements

Many will anticipate educating themselves again mid-career. They may take mini-retirements to take time off, and come back to work again. They know that they will probably work well past the current retirement age, and in fact may not contemplate a final retirement at all.

Their lives will be defined by this flexibility. And it is something for which the financial services industry is largely unprepared.

The products being offered to employees today are essentially the same that have been available for decades. Employees are being offered pension funds, death and disability benefits, and education savings plans based on the experience of providing these products to people living a ‘linear’ life.

How relevant are these solutions to those joining the workforce today, who are frequently changing employment, freelancing in the gig economy, and not expecting life events to happen in a straight line?

Financial services providers have to become more creative in thinking about solutions that are meaningful to people living their lives in a substantially different way. Pension funds that are based on the idea of someone starting to contribute at the age of 25 and carrying on for 40 years until they retire and then start drawing on those savings are the first place to start.

Language of disengagement

“Should we even still call it retirement?” says Nomha Kumalo, head of organised labour and public sector at Momentum Corporate. “How are we reconsidering the vehicles through which we provide financial solutions? The language we use might even be driving disengagement.”

You can’t convince someone that saving for their retirement is necessary when they have no intention of retiring in the traditional sense. To make saving meaningful, it has to be relevant.

Employers and financial services providers can no longer get away with imposing products on employees and clients. As Regard Budler, the head of product solutions at Momentum Corporate notes, solutions have to be designed from listening to what people really need.

“They want change,” he says. “They are used to success on demand. We have to think differently about the way we work, and where we work. We have to ask people what really matters to them and solve through that approach.”

Ultimately, the changes to products might be subtle, but how they are packaged and presented will be key.

“The challenge is finding a balance between the stability of products and remaining relevant to the needs of the workforce,” says Budler. “Fundamentally people might need the same thing, but the way we execute it and the way we deliver it has to be more flexible. One size has never fitted all, and it definitely isn’t going to in future.”

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See no reason to reinvent the wheel.

At some stage one might have to stop working due to ill health or whatever when older, and something will need to sustain you (if you do not go to the suicide booth, as shown in Futurama). Sounds like something retirement savings would be useful for. And if you don’t want to do this thing called retirement, you eventually have extra money to do spend or donate or whatever, call it financial independence if you want.

As to these “mini-retirements” to reskill oneself and being in the gig economy and whatever, little need to rethink products (beyond enhancing flexibility of some of these products perhaps), the person who wants to do those things just has to have the discipline to save in various short, medium and long term products and then use the savings for those things.

Let me see: Anyone over about 50 is considered unemployable. Further, few have marketable skills sufficient to maintain a decent standard of living, let alone support 30-plus year old children who just won’t leave home, after that age. Then, as supersunbird says,there’s the problem of declining health. How is one supposed to work until 90-plus and never retire, exactly? The bottom line is that as you get older you will need money, so there’s still no need to re-invent the wheel. Plan to “retire” at some arbitrary age like 60 or 65 and then put what you have into another growth fund until you need it.

The more things change the more they stay the same and Twitter is not going to stop us from becoming old and sick.

I agree with both supersunbird and carwriter. In the end you can call it what you like, but at some stage you will just not be able to earn enough to cover your expenses. I’ve been “working from home” (everywhere and anywhere)for the last six years and plan to do so well into my seventies (if my health holds up). In the end you need to save and build wealth to ensure you have enough to carry you to the end of your life. The challenge the millenials in particular face is that they are hooked on instant gratification and don’t seem to be saving a lot. Rainy days have a habit of striking when least expected.

I don’t plan or want to ever retire, and don’t anticipate running out of employment opportunities.
However I still need to provide for retirement:
My wife is 7 years younger than me and dependent on my income. Based on her life expectancy there is a 50% chance she will require a pension income for more than 15 years after my death. I can also not predict if ill health may at some point derail my plans to continue working.
Insurance can’t solve these problems, as it becomes prohibitively expensive to maintain life insurance premiums in old age, and disability insurance is not available past a certain age (with PPS its 66).

Here we go again – another super salesman dissertation on what you need to do to ensure that he has enough income to sustain his lifestyle. It may well be the persons intent to not retire and that they believe they can work forever – regrettably its all nonsense. Once you get to about 40 you are a candidate for early retirement as your cost to company is exhorbetant and it’s easier to employee a couple of 20 year olds for the same price – quality of output is not a consideration. I bet this same argument around retirement has been ongoing since the 1900’s. I would find it uniquely interesting to see how these great thinkers are going to marginalize some professions because their business model are linear :- doctors, dentists, surgeons, hospitals, transport, supermarkets – whomever provides a service and sets rules for users of those services are going to be inconvenienced regarding appointments. Can’t wait to seem home heart operations, or 911 services saying see you in 24 hours

It’s an interesting, but not very surprising phenomenon that these organisations and individuals in the “financial services” businesses tend to hand around you when they believe that you have some spare money to let slip in their direction.

We save money and invest it so that when the days come when we no longer have a fixed in come, we can still survive – and also look after loved ones. Then we look up and see these vultures are circling. Just like the politicians – hanging around the pools of plunderable reserves.

Next week’s article: Why take medical aid cover if you don’t intend to get sick?

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