Some older workers find retiring hard to do. With the right financial advice and lifestyle adjustments, they can continue to work – and it can even prove good for their health.
Jenny and Peter “Herb” Gardner have created what many would regard as an idyllic transition to retirement on their organic vineyard in Canowindra, 300km west of Sydney.
In a textbook example of long-term planning, the Gardners bought the land 13 years ago, planted their first grapes that same year and then built a straw-bale house clad in local clay.
The first vintage of Gardners Ground wine was produced within three years.
Meanwhile Jenny, now 67, and Herb, 70, progressively shed their Sydney life as they became more confident that the “experiment” was working: they sold their inner-city home and eventually their medium-sized industrial business.
Having worked hard throughout their lives, the couple now work about 15 hours a week.
They grow the grapes, organise the wine-making and market their expanding range, calling on professional help and labour when needed.
The Gardners are representative of a fast-growing global trend for people to remain in the workforce well past traditional retirement ages, often reducing their workloads and switching, if possible, to occupations that reflect their personal interests or passions.
A special report this year on the world’s ageing workforce by The Economist magazine’s Intelligence Unit predicts: “Retirement, as experienced by post-war generations, could soon become a thing of the past.” And it seems many workers would welcome the change.
The report, commissioned by human resources and financial consultancy Towers Watson, points to European Commission research suggesting that a majority of Europeans find the prospect of working part-time and receiving a part pension preferable to full retirement.
Certainly, the broad drivers of this trend to working into old age are greater longevity, generally inadequate retirement savings and pressure on government age pensions.
"In their late careers, people often want to do what they were once so passionate about in their early careers." – Alison Monroe, Sageco
Yet it appears, at least anecdotally, that increasing numbers of older people, including those with substantial retirement savings, are finding work a more fulfilling way to spend their time than being on a beach or golf course.
The latest Australian Bureau of Statistics’ (ABS) Retirement and Retirement Intentions report shows that one in five working Australians over age 45 intends to retire at 70 or older.
Thirteen per cent never intend to retire while another 8 per cent haven’t made up their minds if they will ever retire.
By contrast, the ABS reports the average retirement age of those who retired in the past five years was 61.5 years.
Preparing yourself for the 'Third Age'
Research reports and media articles tend to focus on how employers can make the most of an older workforce.
Somewhat overlooked are how individuals can best prepare themselves for working past popular retirement ages and how to make the most of the potential health and financial benefits of a longer working life.
Career coach Alison Monroe believes individuals preparing to work beyond traditional retirement ages should create a “life plan” that candidly sets out the state of their health, their personal finances and their career.
And then the plan should set out their aims to make the most of their circumstances.
Monroe, group chief executive of career consultancy Sageco, is a specialist in guiding the careers of an ageing workforce.
When drafting their plan, Monroe suggests that older workers take into account:
- Health: Question whether you have the physical and mental agility for your present job. Should you consider a less demanding role? Should you take advice about how to improve your health – looking at exercise, stress, diet – to increase your work longevity?
- Money: Look at your financial position, goals and commitments. And Monroe asks clients: “What does your bucket list look like and how are you going to fund it?” She typically suggests that clients see a financial planner to get a financial plan.
- Career: Ask yourself some “powerful” questions about how your career is going, Monroe says. What aspects of your career are working well? What could be working better for yourself and your employer? What do you no longer feel skilled in or passionate about? And what work would you love to be doing? With answers to such questions, she believes older workers can create a vision for their future careers.
“In their late careers, people often want to do what they were once so passionate about in their early careers,” Monroe has found.
“But their careers have moved onwards and upwards. Sometimes, it is about designing a role to use your skills and passions even if it may mean giving away managing a team of 60 and a A$100 million budget.”
For some senior executives, the obstacle to taking on a less stressful role and working fewer hours a week is their unwillingness to take a pay cut.
Monroe suggests that executives wanting to keep working until an older age, yet at a slower pace, should be flexible about their remuneration to ensure that they will still offer employers value for money. “Don’t be greedy,” she advises.
"With people living longer, the financial abuse of elders is becoming a worrying issue for accountants."
Dr John Lang, director of workplace health consultancy John Lang & Associates, agrees with Monroe about the importance of good health for those intending to work into their sixties and beyond.
He suggests that people with ambitions to work into old age adopt a practical strategy to slow the inevitable physical and cognitive deterioration from growing older.
Lang says the fundamental approach is easy to articulate – eat well, keep fit, manage stress and don’t smoke – but it is difficult for many to implement in middle age if they haven’t developed good habits throughout their lives.
He is convinced that a fit 60-year-old will outperform an unfit 40-year-old in any standard test of cardiovascular fitness. And Lang emphasises that productive and enjoyable work is actually good for your health.
Financial planner David Rolleston CPA advises typically high net-worth clients who generally intend to keep working past traditional retirement ages – even though they can well afford to retire.
Rolleston, executive director of UBS Wealth Management and a member of CPA Australia’s Retirement Savings Centre of Excellence for retirement savings, says very few of his older clients want to spend their time “sitting on the beach 24/7” or repeatedly travelling the world.
His business-owning clients usually have no intention of ever retiring, while his clients who had careers as corporate executives usually change their work patterns before reaching 65, perhaps taking part-time work or doing something less stressful.
“My experience is that those clients who had retired early, certainly before 65, are generally finding that retirement is not for them,” Rolleston says.
“They miss the work environment so may take up board directorships and/or work with charities.”
Rolleston is finding that more of his clients still only in their forties and fifties are taking a step that is likely to eventually extend their working lives.
“They are taking six to 12 months out of the workforce,” he says, “to travel with the kids overseas or in a campervan around Australia. It recharges their batteries.”
His practical financial planning pointers for anyone considering working beyond 65 include maintaining contributions to superannuation and regularly moving superannuation savings from a so-called accumulation account into a superannuation pension account where fund earnings are not taxed.
He suggests that older working couples adopt strategies to ensure that their superannuation savings are balanced as evenly as possible between spouses.
This is as a precaution in case the law changes to tax earnings of superannuation pension accounts or superannuation pensions (which in Australia are tax-free for people aged over 60).
Rolleston believes that working past popular retirement ages provides a “critical” opportunity to try to pay off any debts. “You don’t want to go into retirement with debt – it is very hard for retirees to get out of.”
Michael Rice, chief executive of Rice Warner, which specialises in wealth management research and advice, says individuals can potentially boost their eventual retirement income by perhaps 20 to 30 per cent by retiring at 70 rather than 65 – depending on the circumstances.
This is because their superannuation will benefit from five more years of contributions and five more years of earnings to finance what will be a shorter and therefore less costly retirement.
Rice, whose studies include adequacy of retirement savings and workforce participation, is emphatic that older workers need to “remove the mindset about a need to retire” on becoming eligible for the age pension.
He agrees with Monroe that a practical step older employees can make to extend their working lives is to critically examine their skills and to perhaps re-evaluate their worth to an employer.
“You might be earning A$200,000 a year,” Rice says, “and you may realise that you are slowing down.”
Rice suggests that older employers consider the option of approaching their bosses with a proposal to work for, say, another five years or so in return for a lower salary that reflects their perhaps reduced productivity.
“Then the employer probably gets better value for money, and you don’t have that terrible conversation where the boss says: ‘you are not as good as you used to be’.”
And here’s a final couple of tips from industrial businessman-turned-vigneron Herb Gardner for older individuals who want to make a working tree-change by setting up their own enterprises in the bush.
“Make sure you go to a district where there are professionals and qualified labour to call upon for the various parts of your business,” he says. “And look for somewhere with people who appear to reflect your desired lifestyle.”
The Asian way of retiring
Ambitions of retiring to a beach house and watching the waves break are not “culturally prevalent” among the older professional and business-owning clients of Singapore-based remuneration adviser Jon Robinson of Freshwater Advisers.
He says his professional clients tend to leave their partnerships in their mid-fifties or early sixties and take on a portfolio of assignments including company directorships. His business-owning clients remain with their enterprises into very old age.
The An Ageing Australia: Preparing for the Future report by Australia’s Productivity Commission points out that by 2060, one in eight Japanese will be aged 85 or over – compared with Australia’s projected one in 17.
In China today, only 8 per cent of Chinese are over age 65. By 2060, more than 28 per cent of its population will be over 65. And almost a third of Singapore’s population is expected to be over 65 by 2040.
Robinson says most Singaporeans who held senior positions would have adequately saved for their retirement. “[But] they are culturally driven to want to keep on working. They want to remain engaged and economically productive.”
Robinson has advised the Hong Kong and Singapore governments on their retirement policies.He says Singapore’s Central Provident Fund provides an “absolutely subsistence” income in retirement.
The position is similar with Hong Kong’s scheme, which is newer. “If you want more than that, you should have saved your own money or will have to keep on working,” he says.
Personally, Robinson, who has just turned 55, intends to keep working for as long as he can. “I find work stimulating and intellectually satisfying; it is how I prefer to spend my day. Money is not the primary motive.”
Andrew Heng, executive director of Baker Tilly Malaysia, says his professional clients tend to remain working for as long as possible.
Many give priority to providing their children with an overseas education in Australia or the UK over their retirement savings.
His higher net-worth clients with their own businesses typically keep working into their old age, perhaps “unsure of what to do if they didn’t work”.
Financial abuse of elders
With people living longer, the financial abuse of elders is becoming a worrying issue for accountants.
In Australia, adult children, particularly adult sons, are the most common perpetrators.
Financial abuse isn’t necessarily outright theft; it’s when someone illegally or improperly uses a person’s money, assets or property. It can include:
- Misappropriation of property, money or valuables
- Forced changes to a will or other legal document
- Denial of the right to access personal funds
- Forging of signatures – on bank accounts or legal documents
- Misusing enduring power of attorney
- Going shopping for groceries and not returning the change
CPA Australia’s Victorian Third Age Network Committee is part of a taskforce that, in conjunction with CPA Australia, developed tools for accountants to more easily identify financial abuse of elders, assist their clients to find help, and prevent it occurring in the first place.
Identifying financial abuse is important, both for the victims and for public practitioners avoiding the risk of a negligence action. Accountants should be sensitive to any changes in a client’s behaviour or financial situation.
“Signs to look for include a client wanting to transfer assets unexpectedly, or if they are always accompanied by a family member to appointments, which may prevent honest conversations,” advises Sue Hendy, CEO of Australia’s Council on the Ageing.
Accountants should also consider that family relationships change. “Relationships and households can break down,” says Sue Marshall, general manager of Victoria Plus at Victoria University.
“If it was a business relationship, people in professions like accounting would ensure that certain safeguards were put in place.”
This article is from the November 2014 issue of INTHEBLACK.