Members of a roundtable discussion hosted by Blackrock discussed many alternatives to the current norms that basically require you to retire the day after your 65th birthday. In fact, they pointed out, the social construct of retirement is outmoded, and many people would work longer, at least part-time, if given the opportunity. It would be good for them and for society.
As the panelists said, life expectancy has nearly doubled in the 20th century, but instead of adding years to our work, we just tacked the added years onto our retirement. Today, retirement calculators tell you the likelihood that your savings will cover that average lifespan – but they conveniently ignore the 50% who live beyond the average.
One thing we can do is create a legal right to a phased retirement. I have suggested in my Social Security reforms a gradual buy-in. That’s the place to start to help prepare people for the two stages of retirement. We have most of products we need. We just need to plan better and break down product silos.
You may have seen the story in the January 22 Wall Street Journal suggesting for low savers that, among other strategies, reverse mortgages can be a good source of income for retirees. I have spoken in the past with the reporter, who is knowledgeable but reluctant to include income annuities in possible solutions to investor retirement savings challenges. It’s not all that different than what advisors do when they are stuck in silos created by the companies they represent or their own narrow viewpoints. The reality is that taking advantage of savings breaks, delaying Social Security, and using the equity in your house are all worthwhile; including income annuities in the mix has a multiplier effect. As we say, “income annuities don’t make your retirement, they make your retirement better.”