“We have a longevity paradox. Now that we have achieved what humankind has tried to achieve since it has walked – living longer – we really don’t have a good idea of what to do with all that additional time.”
– Dr. Joe Coughlin, Director of the MIT AgeLab
The folks at Hartford Funds have partnered with the MIT AgeLab to help firms like ours better understand the key issues that are important to our clients as we grapple with increasing longevity and the future of retirement. The AgeLab was established at MIT in 1999 as a multidisciplinary research program that works with businesses to improve the quality of life of older people and those who care for them. The AgeLab applies consumer-centered thinking to understand the challenges and opportunities of longevity and emerging generational lifestyles to encourage innovation across business markets.
This week our team at Concentus was fortunate to have a visit from the folks at Hartford Funds and the AgeLab. The insights we learned are critical for anyone who is nearing retirement, or who has loved ones such as parents, aunts, or uncles who are entering this stage of life.
Life in 8,000-Day Segments
AgeLab has developed an interesting model to describe the distinct segments of life that most Americans experience. In this model, most of us live through four distinct periods in our lives, which are each roughly 8,000 days in length, or about 22 years.
In our first 22 years of life, we experience the “Learning” stage. During this time, our primary focus is on obtaining new skills and knowledge to prepare us for the challenges and opportunities that we will face over the rest of our lives. During these years, we spend most of our time in school and are taught and mentored by our parents, grandparents, teachers, and coaches.
Between the ages of 22 and 44, we enter the “Growing” stage. This is the time for us to strike out in the world on our own and begin using some of the skills and knowledge we have accumulated to establish our own lives. During this time, we begin working and building a career and a family. For most people this is the time to find a spouse and marry, have babies, raise young children, and buy our first home.
During the “Maturing” phase, between ages 44 and 66, we are hitting our stride professionally and experiencing our peak earning years. It is a good thing, because our lifestyle is also becoming more expensive. We may now be paying for expensive education for our children, and may even be supporting our own aging parents. Perhaps we “upsize” our primary home or buy a vacation home. These are busy years in which our responsibilities are at a peak: our professional responsibilities are the most demanding of our lives, we are focused on the difficult task of raising adolescent and teenage children, and we may even be responsible for caring for our own parents.
Finally, we reach the “Exploring” phase between ages 66 and 88. During this phase, which has traditionally been known as “retirement,” our responsibilities to others begin to diminish, and we are afforded the opportunity to enjoy and “explore” our lifestyle more than ever before. By this time our children have grown and are on their own, our financial and professional responsibilities become easier, and we have the time and the money to take a step back and enjoy life on our own terms.
It is well documented that the coming years will see a massive explosion of Americans who will enter the “Exploring” stage of life, as Baby Boomers reach their sixties and seventies in huge numbers. However, this phase of life is a relatively new phenomenon, which has been created due to the significant increase in longevity over the last century. One hundred years ago, a healthy American baby boy was born with a life expectancy of about 47 years and probably ended up living to about age 69 or so. His “retirement” life lasted only a few years. Today, a healthy American couple of age 65 has almost a 50 percent chance that at least one spouse will make it to age 95.
The Baby Boomer generation is the first group of people in the world’s history who will be granted the opportunity to live for 20 or 30 years in retirement, or in the “Exploring” stage of life. The downside to this fact is that there is no real “blueprint” for how to navigate this new territory. In the words of Dr. Joe Couglin above, “We really don’t have a good idea of what to do with all that additional time.”
The traditional view of retirement planning is all about the money, and a focus on the question: “Will I have enough?”. Indeed, research shows that financial concerns about retirement are at their peak for people between the ages of 25 and 65. However, when people actually reach the “Exploring” stage of life, their top concerns begin to change. Financial worries begin to take a backseat to concerns such as isolation, healthcare, and loss of cognitive function.
When we reach age 65, there is a tendency to worry less about how much money we have, and to worry more about the quality of our lives and relationships in this final stage of life. The question is no longer, “How much will retirement cost”, but, “What will I do in retirement”?
MIT research has also identified four distinct phases of the “Exploration” period of life to describe the various issues faced in this period, and the relevant quality-of-life questions. Those stages are:
- The Honeymoon stage
- The Big Decision stage
- The Navigating Longevity stage
- The Solo Journey
Each of these periods presents unique challenges and opportunities and requires complex decisions. In coming weeks, we will explore each of these stages in detail and discuss ways to plan for each. Stay tuned!