“Mind the gap!” The voice calls out again, “mind the gap!” The warning is broadcast thousands of times each day on London’s ‘Tube,’ the city’s public transportation system. Since its introduction over 50 years ago, “Mind the gap!” has become a branded slogan for British tourism, as well as a distinctly familiar phrase that signifies bringing attention to a problem that may be overlooked in the rush of everyday life.
Much like the hurried, and typically distracted, commuters using the London Tube, most of us moving fast and head-first into older age need to mind the ever-widening gaps in planning a secure retirement. Most of us give little thought to the uncertainty that our future selves will navigate during this period of our lives. We assume that just staying the course of saving a little each year, combined with income from publicly funded sources, with perhaps a little help from an employer retirement plan will take care of those years ahead — just as it did for our parents and grandparents.
Unfortunately for many who hold these assumptions, there will be surprises ahead: This is not your parent’s retirement. Here are three surprising gaps that you might not be minding in your retirement plan.
First, retirement is likely to be far longer than you think. It’s unlikely to be the vision of a brief period of earned recreation and relaxation imprinted in our imaginations by media and financial product guides. Retirement, given today’s life expectancy, is a full one-third of your adult life—8,000 days. That’s the same amount of time it took for you to complete your formal education in your teen years, or the same stretch from the end of your college days up to what some call the midlife crisis. Hmmm… My bet is you faced a few surprises in those decades. Why then, would there be stable, predictable waters over the same number of years in older age?
Retirement planning poses questions about future goals and objectives. Responses typically include nebulous goals such as plans “to travel, to volunteer, to spend time with family, and to get to all those hobbies that were postponed for decades.”
All those activities sound good — for maybe a year. But, how will you fill 20-plus years? Mind the gap!—the gap between imagining and planning retirement as a vacation instead of an entirely new life stage. Other than work and raising children, how many pursuits in your younger years lasted for decades? Brochure images of beaches, golf, gardening, cooking, bike riding…will those activities alone happily fill your days for decades?
Second, you are going to live longer than you planned. This is great news! In fact, retirees today are reported to have gained a full four more years of life in retirement since 1980. The problem is your employer’s pension plan, your savings plan, and even the public and private insurers you may be depending upon did not plan on your good fortune.
Ironic, isn’t it. Living longer, a longevity dividend of sorts, is the gap that most people fear —outliving the savings necessary to support quality living. Or worse, becoming a financial burden to your adult children.
Unfortunately, there appears to be good reason to be worried. A recent study conducted by McKinsey shows that pension systems in 22 countries are unlikely to provide the retirement income necessary “to replace average earnings.” In fact, in both Canada and the United States, the gap between life expectancy and the security of receiving mandatory pension payments to replace average earnings in retirement is nearly a decade. Mind the gap!
Financial industry-led initiatives such as the Alliance for Lifetime Income have been leading the charge to put the need for a diversity of income sources in retirement on the planning agenda of individuals and families. Regardless of the products and strategies that may provide these income streams, the need for lifetime income is critical to mind the ever-widening lifespan/wealthspan gap.
Third and finally, few plan on social gaps in retirement. Social connection, and being engaged with others, was easily achieved at a younger age by simply going to work each day, belonging to community groups, and participating in activities that typically revolved around the lives of our children. Mind the gap!
Out of the workplace and with the children having moved on, staving off the now chronic condition of social isolation requires reaching out and establishing new sources of connection. Donato Tramuto, CEO of Tivity Health, which operates Silver Sneakers, an exercise and social engagement program available to nearly 15 million older Americans, noted “the health effects of social isolation are a public health crisis. It increases the risk of premature death by almost 30%, making it more harmful than obesity or physical inactivity.”
AARP reports that one in three adults over the age of 50 lack regular companionship. Despite what appears to be an ever-growing, and global, problem of social isolation, few people consider how they will remain connected in their advanced years as part of their retirement plan.
‘Mind the gap’ may be a fun expression plastered on London souvenir T-shirts and mugs, but who is alerting us to the new gaps in retirement planning? While we go through our daily lives, chins up, with the idea that our retirement will be similar to our parents, but maybe just a little longer, we may unknowingly fall into the growing gap between what we think retirement will be, and what tomorrow’s retirement actually demands.
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