Retirement gurus, economists and other Big Thinkers like to talk about “the longevity bonus” — the extra 30 years or so that have been added to our lifespans, according to mortality statistics. The question is: What’s the economic impact of the longevity bonus?
Put another way: Which products and services will help us live longer and more active lives, what will the impact be on the United States and how will the longevity bonus change the way we approach work and retirement?
I have some answers, based on what I just heard at a program called: The Longevity Bonus: The Economic Impact of the Retirement Megatrend in, appropriately enough, New York City’s Museum of American Finance.
The event, sponsored by Bank of America Merrill Lynch, featured Joseph Coughlin, director of the MIT AgeLab (and one of Next Avenue’s 2015 Influencers on Aging); former Senator Bob Kerrey (D-Neb.), now managing director at Allen & Co.; Nora Super, former executive director of the White House Conference on Aging, now chief of programs and services for the National Association of Area Agencies on Aging (a Next Avenue Influencer on Aging, too); Michael Hodin, CEO of the Global Coalition on Aging and Andy Sieg, head of Global Wealth and Retirement Solutions at Bank of America Merrill Lynch.
Kerrey felt gridlock is preventing policy changes needed to address ripple effects from the longevity bonus, such as the coming Social Security shortfall.
Writing a New Social Contract
Said Coughlin: “We need to write a new social contract on what it means to live to 100 or beyond.”
Sieg, whose firm has hired a financial gerontologist (Cynthia Hutchins, who was also one of Next Avenue’s 2015 Influencers on Aging) called the longevity bonus “unprecedented in the broad sweep of human history” and said it is “redefining the world around us in a host of different ways.”
That may be a little hyperbolic, but Sieg’s not far off. Tacking several decades onto our lives has enormous implications, some good and others not so good.
As Sieg noted: “It’s tremendously positive because we’ll have many more decades to enjoy our relationships and to be productive and engaged in the world. But at the same time, there are an array of risks and a set of choices that this generation and subsequent generations will be forced to make.”
The Financial Downside of the Longevity Bonus
Kerrey offered a warning about the financial pinch the longevity bonus could have on some older Americans: “If all you have is Social Security when you retire, you will almost certainly live in poverty,” he said. “Unfortunately, way too many are heading for that moment.” However, he added, “people who save money will live very well and be very active.”
Kerrey was equally concerned about prospects for future Social Security beneficiaries, if the Social Security retirement trust fund is insolvent by 2034, as forecast. “We’re looking at a 25 percent cut in benefits under current law,” Kerrey said. “That’s the promise.”
Kerrey felt that Washington political gridlock is preventing policy changes needed to address ripple effects from the longevity bonus, such as the coming Social Security shortfall. “Republicans don’t want to vote for any tax increase and Democrats don’t want any benefit cut, not matter how modest,” he said. “They’re all saying ‘mañana,’” more focused on getting re-elected than dealing with something that might happen in about 18 years.
The Products and Services That Will Succeed
The panelists also scolded Silicon Valley for their approach to creating longevity-bonus products. “People want them to design products with them, not for them,” said Super. “Silicon Valley entrepreneurs go wrong when they assume what older people want without testing products with them.”
As the Tech50+ website recently noted: “The tech industry needs to take the 50+ audience more seriously.” Time’s Dan Kadlec, in an article called Your Longevity Is Good For Business, said that people 50+ represent “a global market nearly the size of China,” adding that “people past 50 control 70 percent of the nation’s disposable income.”
Coughlin said the info tech products and services that will succeed will be the ones that “make life easier.” A few examples he cited: self-driving cars (for older people without access to public transportation) and robots or electronics that cut your grass or tell you to take medications.
He was especially high on the one-year-old, small voice-controlled Amazon Echo tabletop machine (cost: $180 to $300), which The New York Times’ tech writer Farhad Manjoo recently described as “The Next Great Gadget.” You may have seen the Alec Baldwin commercial for “Alexa” during the Super Bowl.
Hodin talked up Nestle’s Galderma skin care line that treats skin care conditions. “When we died at 63 or 67, our skin didn’t go bad,” he said. “But now, there are a billion people with deteriorating skin. That opens up a huge marketplace.”
Kerrey mentioned two service companies making inroads. One is the SilverSneakers exercise program (part of Healthways), designed for people 65 and older and offered through 13,000 fitness and wellness facilities. Some 65 Medicare Advantage plans and Medicare Supplement Health plans include SilverSneakers memberships. The other is Honor, an online startup that finds in-home caregiving specialists for families. Kerrey’s on the board, as are notables including Jessica Alba, Yelp founder Jeremy Stoppelman and venture capitalist Marc Andreessen. “It’s relatively low-cost and the caregivers assess whether people are eating enough, sleeping well and have any pain,” said Kerrey.
How Employers Need to Adapt
The panelists also felt employers needed to wake up to the longevity bonus. According to a new Wells Fargo survey, 67 percent of non-retired investors want to work as long as possible and 51 percent want to delay retirement as long as possible. But will employers let them?
The experts I heard said employers must better utilize their older workers and help more of them gradually phase into retirement, not force them out early.
“The challenge is that in layoffs or downsizing, older workers are often some of the first to go because they tend to make more money,” said Super. “More employers need to look at phased retirement and older workers mentoring younger workers and opportunities for shared learning. They’re just starting.”
Said Coughlin: “We want older workers to get out of the way for younger workers. But guess what? There’s not a long line of younger workers going into engineering or medicine. There’s been a truck driver shortage for 20 or 30 years.”
Employers also need to deal with employees with growing caregiving needs, said Hodin. “One of the sleeper issues is that workforce productivity declines as a consequence of 48- to 60-plus-year-old employees having to take care of their parents,” he said. “Companies will need to address this out of self-interest. They’re not doing much right now, but stay tuned.”
The Coming Encore Career Boom
Super expected to see a boom in the encore career movement, where people leave their original careers to do work — either paid or volunteer — for the greater good.
“There’s a growing interest in second acts where you do what you want to do in this new stage of life,” she said. “They say: ‘I don’t want to work in finance or health or marketing anymore, but I want to apply what I’ve learned to nonprofit work. We’ll see more of that.”
Coughlin added that the longevity bonus means society must think differently about education. With our longer lives, he said, “you’re not done with education at 18. Working for a lifetime means learning for a lifetime.”
He also expected major disruption — and opportunities — in the banking and investment world. “In the next five years, the financial services industry has the opportunity to reinvent what we call retirement planning,” said Coughlin. “It won’t be just about financial security. It’ll be about how to navigate the next years of your life.”
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