Silver Tsunami

When Chancellor Otto von Bismarck invented the old-age pension some 130 years ago, he didn’t exactly foresee busloads of happy ­Germans ­playing shuffleboard at the rec complex. In fact, he was pulling a fast one on his own people: By setting the retirement age at 65 – life expectancy, more or less – he wanted to pacify them with a gift that few would ever live to collect, much less enjoy.

In the end, of course, Bismarck’s pension idea had legs. And since today’s retirees now routinely live well into their 80s, they are benefiting from it in ways their forebears could not. But as the baby boom ages (with some 10,000 Canadians retiring every day), our society is facing an onslaught of new questions about what retirement means. Is the current system financially sustainable? Even if it is, do we need to redefine the concept entirely?

What’s certain is that the old stereotype of retirement (i.e. staying for 40 years with one company, followed by a gold watch and defined benefit pension for life) is going the way of the great auk. So too is the idea of a senior citizen as non-stop leisure consumer – a gardener, a baker, a player of cards.

Sitting in a Toronto café, York grad Betty Lazebnik thinks about friends who are all, like her, baby boomers born in the 1950s. “Everyone is doing something different,” she says, “but they’re all busy, vital and connected.” She rhymes off the list: ardent volunteer, graduate student, full-time writer, world traveller, social worker turned jazz musician. A music teacher herself, she has no current plans to stop. “I still need the income. But I don’t mind at all, because I love what I do.”

There is no typical retiree today because there is no typical worker. Most in the public sector still have solid indexed pensions, in part because of unionization. But only 24 per cent in the private sector enjoy the same privilege (40 years ago, the majority were covered). Currently, retirees must make do with a patchwork quilt of funding sources: RRSPs and TFSAs, housing equity, inheritances and government assistance.

Still, when compared to members of other countries or other generations, Canadian baby boomers will probably do alright. Canada has done away with mandatory retirement, but many other countries haven’t; in South Korea, for example, workers are often forced out in their mid-50s. American workers do receive Social Security (their equivalent to the Canada Pension Plan), but non-working seniors have no entitlement to universal health coverage, which we do in the form of Old Age Security. Boomers had a much easier time than millennials breaking into the housing and job markets as young people and their housing gains have been greater. They are generally healthy, and much more physically capable of longer working lives than their predecessors were.

Employers like to see people full-time, and to see them every day

With all these great advantages, one wonders whether we shouldn’t just retire our retirement age. Before Chancellor Bismarck came along, retirement didn’t exist at all; you died with your boots on. So if people can keep working – and they enjoy doing so – shouldn’t we require them to work longer? (After all,  the average age of retirement in Canada today isn’t even 65, but a strikingly low 63.)

Even if you answered yes, you’d have a hard time convincing everyone around you. It’s true that some seniors look forward to leaving the workforce, as a reward for services rendered. But it’s also true that others want to stay in and can’t. As sociology Professor Stephen Katz points out, our society is terribly ageist: “Older workers are discriminated against. It’s incredibly hard to get a job if you’re over 50,” let alone 65.

Schulich School of Business Professor Moshe Milevsky echoes that sentiment in his book Pensionize Your Nest Egg: How to Use Product Allocation to Create a Guaranteed Income for Life. “People should remember that retirement isn’t as voluntary as they think,” he writes. “They think it’s a kind of trigger that they pull. But many of them will be forced out for health reasons, or downsizing, or the economy, or their skills are obsolete. Suddenly they say oh! My plan was to keep on working. Now what do I do?”

Retirement, then, is a double-edged sword. It promises a carefree period of 30 years or even more, in which you can do absolutely anything you want. But we pay dearly for that utopian idea, with the presumption that older people aren’t good for anything more than having fun.

Some baby boomers will be able to weather that prejudice, cushioned by savings and pensions and inheritances. But others will not: According to a recent study by the Broadbent Institute, only 18 per cent of people in the 55 to 64 age category have enough money saved to last them five years or more. With active seniors living longer lives, “retirement itself is disappearing,” says Katz. “But at the same time it’s completely necessary because of the rate of marginalization and abandonment of people who really suffer.”

It’s worth taking a look at the boomers who may be more vulnerable in retirement than others. First among them: women.

“The greatest change in retirement in the past 30 years has been for [women],” says Professor Thomas Klassen, who teaches political science and public policy at York. His highly informative 2013 book, Retirement in Canada, presents a mostly reassuring picture of the future for boomer seniors and the society they live in. But women face significant challenges.

For one thing, their male partners are often older. “In the old days,” he says, “when one partner wanted to retire it was easy for the woman to go along with it. But when you have two partners in the workforce and the man says I’m ready, the woman might say she’s not.”

Women who have had careers as teachers, health-care providers and social workers can often look forward to good public sector pensions. But those who’ve been out of the work force for a long time for caregiving may be in jeopardy. Women also tend to live longer than men, by an average of five to seven years. All of this means they are twice as likely than men to be poor in old age.

Another group that must watch out is middle-income earners. “Canada has done a better job than most countries to ensure that our current generation of seniors can retire comfortably,” says Schulich School of Business Professor Amin Mawani. “But low investment returns for the past few years, and a potential housing sector bust, could jeopardize seniors’ retirement income security.”

Mawani points out that wealthy boomers will obviously do well, and those who are poor can actually raise their standard of living with government assistance. “Most of the time when we say people are in trouble, we mean they won’t be able to maintain their lifestyle. It’s the middle-income group who may not be able to.”

While the costs of living generally go down in retirement – you’re relieved of childcare expenses and those associated with full-time work, such as transportation – Mawani ­cautions that some usually go up, such as health care. Milevsky agrees that Canadians don’t think about this nearly enough, compared to Americans (whose health-care payments are a perennial concern throughout the life cycle). We Canadians, on the other hand, assume falsely that all our needs will be covered. Says Milevsky: “I recommend that people visit a provincial nursing home for an hour and say, ‘OK, do I want to spend the last 36 months of my life here, or do I want something slightly better?’ ”

But “something better” might be out of reach, with high investment fees and interest rates at an all-time low. So reliance on one’s savings accounts, even if you’ve been diligently socking money away since the last Trudeau administration, isn’t a sure thing. Pensions are decreasing and the latest ­Canada Pension Plan boost won’t come into effect until many boomers have retired, so the prospect of outliving one’s nest egg is a frightening one.

Life will all be modular; you won’t have to buy the whole fish, you can buy half a fish

That’s why some creative thinking on finance is now in order. One intriguing suggestion has been recently advanced by Milevsky in his new book, King William’s Tontine: Why the Retirement Annuity of the Future Should Resemble its Past.

First invented in the 17th century, a tontine is a way of ­guaranteeing income for life. You simply put a certain amount of money into a pool with a group of fellow investors and you’re paid back at regular intervals, but your payouts increase as subscribers die off. The last man (or, more likely, woman) standing enjoys the final payout. “It’s a peer-to-peer annuity,” says Milevsky, a highly regarded expert on retirement planning who’s written several other books on the subject. “Adults can band together, possibly online, to do it. This eliminates the need for an insurance company’s involvement, which can be expensive.”

If the idea sounds pregnant with ghost-story possibility, ­perhaps it is; even Mr. Burns and “Grampa” Simpson once faced off as the last survivors in a Simpsons tontine. But Milevsky points out how frequently we profit from the misfortunes of others (i.e. through insurance and inheritance). And while you certainly know who stands to gain in your family, a tontine can be anonymized so you don’t know who’s in your pool. “I don’t want to oversell this as the silver bullet that’s going to solve all retirees’ problems,” he says. “This is just about putting another item on the shelf for them.”

The way we invest has to change, and so does the way we work. Twenty years ago, David Foot and Daniel Stoffman predicted in their popular book Boom, Bust & Echo that the future lay in gradual retirement: You didn’t stop work completely one fateful day, but rather stepped gingerly down from five days a week to four, to three.

That slow fade hasn’t become commonplace, although people continue to wish it would. “The strong preference of older workers is to continue to be employed, but to work fewer hours,” says Klassen. “The problem is, employers are not keen on that. They like to see people full-time, and to see them every day.”

But Mawani is optimistic that things are changing. In the future, he says, “life will all be modular; you won’t have to buy the whole fish, you can buy half a fish.” This, he warns, has its good sides – and its bad. “You’ll be able to work 10 hours for $10. But, increasingly, you won’t be able to work 60 hours for $60.”

This means seniors will be grappling with one of the biggest problems millennials also face: they may have no choice but to work “precariously,” on a casual basis with no benefits (as it is, private employers are exempt from having to provide health insurance to employees over 65). It’s worth thinking about whether ride-sharing company Uber’s recent efforts to recruit more senior drivers into piecemeal employment is helpful, or contributing to the problem.

The widespread nature of precarious work in our society highlights the fact that boomers and millennials actually share many of the same concerns. Why, then, are they ­constantly depicted as being in competition with each other? We presume that older people are a drain on public funds, rather than taking pride in our support of the vulnerable in all age groups (Klassen points out how much money we spend on free education for children). We’ve also long subscribed to what he calls the “lump labour fallacy”: that older workers must retire to make way for younger ones, and that mandatory retirement is a good thing because it inevitably opens up jobs.

But Klassen says this isn’t true. In Retirement in Canada he writes: “having more workers employed, rather than fewer, produces an increase in employment opportunities for the economy as a whole.”

Jobs create jobs, because employed people inevitably spend more money than those who are out of work. If 30 per cent of the population were to stop working, labour force growth would stall badly; immigration could make up for this somewhat, but not entirely.

Katz (a faculty Fellow with Trent University’s recently established Centre for Aging & Society) uses the term “intergenerational injustice” to decry the conflict model. Rising health-care costs, for example, are largely blamed on ailing seniors, and not on systemic inequalities or unfair drug pricing. “You have these age pyramids showing a fat population getting bigger. It’s like a scary movie, with these people taking over and eating all the resources. Even the terms used are designed to scare people: the grey tsunami; the age bomb.”

Katz says, by contrast, what helps one generation invariably helps another. Universities can help here: Faced with a shrinking younger cohort, they have an opportunity to expand enrolment and enrich discussion by encouraging older students to enrol. Nor should activism be seen as the province of the young. Increasingly, groups such as the Canadian Association for Retired Persons and the Raging Grannies are attracting seniors eager to make changes that will benefit them, and everyone else as well.

Phony sabre-rattling on both sides of the generational divide invariably contributes to ageism on the part of the old, as well as the young. “Instead of investing in an intergenerative, prosperous future, often the same retired people who brag about the success of their choices are failing to invest in the next generation’s retirement,” Katz says. “Who’s going to pay the health-care taxes of the future if we don’t invest in the younger population?”

For the baby boom generation, retirement will not stop so much as it will be transformed. Even in the good old days of indexed pensions in every pot, Klassen says it has always been “the most stressful and dramatic transition that anyone is going to go through, where our whole conception of who we are and what we can contribute changes.”

Clearly that stress can be mitigated – not by retiring retirement, but by thinking more closely about how we define, fund and celebrate what ought to be among the most fascinating times in any life.