It’s time to change the way we think about retirement. For decades, people have seen it as the end of their career and the start of a more leisurely way of life. But today the distinction is becoming blurred.
Many people can now expect to live beyond the traditional retirement age, giving them more options in how they approach their later years. Over the past 65 years, life expectancy has increased by 13 years in Germany, 21 in Japan and more than 30 in China, according to HSBC Global Research.
To meet the cost of an increasingly elderly population, governments are looking to individuals to plan their own retirement, carrying out pension reforms and raising the state retirement age. Many workers are choosing to phase-in their retirement: continuing to work but reducing their hours, changing jobs or even starting a business.
Many workers are choosing to phase-in their retirement: continuing to work but reducing their hours
According to a new report commissioned by HSBC – The Future of Retirement Choices for later life – 22 per cent of retirees went into semi-retirement before stopping work completely, and more than half (56 per cent) of working-age people plan to follow suit.
The study of more than 16,000 people in 15 countries and territories found that semi-retirement was particularly popular in Asia, with 77 per cent of people in Indonesia, 64 per cent in Malaysia and 62 per cent in Singapore planning to reduce rather than stop work.
Retirees often opt for semi-retirement for positive reasons: because they enjoy work, are keen to stay active or want to switch to a different career. Some, however, are forced into it: 9 per cent became semi-retired because they were unable to find full-time employment.
Others may not be able to afford to retire immediately. The squeeze on household incomes during the global economic downturn meant that some people cut back or even stopped saving. State and company pension schemes are also becoming less generous. As a result, more people are likely to need to continue working part-time to maintain their lifestyle or bridge a shortfall in retirement income.
The growing interest in semi-retirement could be good news for governments. Ageing populations are putting already stretched public finances under further pressure by increasing the cost of pensions, health and long-term care for the elderly.
According to the United Nations (UN), the number of people aged 60 or over is set to rise from 841 million in 2013 to more than 2 billion in 2050. At the same time, falling birth rates mean that there will be fewer workers to support them: the UN forecasts that there will be four working-age people for every person aged 65 or older in 2050, compared with eight in 2013 and 12 in 1950.
This is a problem for both developed and emerging economies, but it is particularly acute in Asia. In mainland China, for example, the working-age population fell by 3.71 million in 2014, according to the country’s National Bureau of Statistics. Asia has also had less time since industrialisation to develop welfare systems that can care for ageing populations.
Encouraging people to stay in the labour force for longer is likely to be an important tool for policymakers: while it will not alter the underlying demographic trends, it will ease their impact. Companies, too, could benefit from harnessing the skills and experience of older workers.
But ultimately it will be down to individuals to take responsibility for their financial future, to consider if they want to work for longer and when they can realistically afford to retire. Semi-retirement may increasingly be the new norm – but it needs to form part of effective retirement planning.
Choices for later life is the 11th report in The Future of Retirement series and was published in April 2015. It represents the views of more than 16,000 people in 15 countries and territories: Australia, Brazil, Canada, France, Hong Kong, India, Indonesia, Malaysia, Mexico, Singapore, Taiwan, Turkey, the United Arab Emirates, the United Kingdom and the United States. The findings are based on a nationally representative online survey sample covering people of working age (25 and over) and those in retirement. The survey was conducted online by Ipsos MORI in August and September 2014, with additional face-to-face interviews in Indonesia and the UAE. Read the full report.