Before I start this blog, and in the spirit of full transparency, this topic matters to me as a fifty-something (yes, hard to believe, I know), so forgive me if bits of it are personalized … but as I will go on to describe, retirement is a personal thing and not all fifty-somethings and the retirees themselves are the same.
We are in an ever-changing retirement planning landscape.
I remember my grandfather retiring in the early 1980s when I was around 15 years old. He’d been what I guess we would refer to today as an “unskilled manual worker”; he basically dug holes for telecom wires to be laid and then filled them in when they were done. I don’t think he wanted to retire, but back then, when you were 65 in the UK you had no choice.
In something of a cliched end to his working life, he received a carriage clock at his send off and the following week was at home with little to do other than look after his prize roses and place bets on the horse racing at his local betting shop. As with many of his generation, his retirement wasn’t particularly long, just five years, and he did very little with it.
The retirement landscape today is unrecognizable from the one my grandfather experienced. It’s well documented that we are living and staying healthier for longer and have so many more post-retirement options presented to us; volunteering, learning new skills, world travel. On the face of it, it sounds like a great time of life.
While there is a lot to be grateful for as consumers approach retirement, there is also a flipside which presents a lot of challenges. One of the biggest changes since my grandfather retired has been in the pensions market where defined benefit plans (i.e. a pension with a guaranteed income for life) have been largely replaced by defined contribution plans where the individual builds up a pot of money and hope it lasts (i.e. a 401(k)). As a consequence, while we are living longer, we also have more uncertainty about how much money we will need, particularly if we have concerns around our health and whether or not we might need to pay for care in later life. And for people in my generation there is often a desire to ensure that we can support our children who will often be burdened with paying off student loans and wondering if they will ever be able to buy their own property.
All in all, it’s a heady cocktail of more time and more opportunities but more uncertainty.
The retirement landscape today is unrecognizable from the one my grandfather experienced. It’s well documented that we are living and staying healthier for longer and have so many more post-retirement options presented to us; volunteering, learning new skills, world travel.”
Workers are changing their approach to retirement.
We all know that people are retiring later in life, some of this driven by countries raising the age at which the government starts to pay retirement benefits. But a large part of the trend comes from the uncertainty consumers now have around how much money they will need to ensure they can live the lifestyle they want.
In the UK this trend has led to record numbers of over 65s being part of the workforce (as reported in mid-2022 by the UK’s Office for National Statistics) and a similar trend is evident in the U.S. as reported more recently by the Pew Research Center.
In addition to working longer, we are also seeing consumers easing into or phasing their retirement rather than simply stopping work completely. One of the trends we see in our work is what some refer to as ‘pretirement’ where workers gradually reduce the number of days they work until they get to a point where they feel comfortable enough to stop. We are also talking to consumers who stop their high-paid, stressful job and swap it for a lower-paid and possibly part-time role where they can still feel part of the workforce and still bring in a wage.
As well as changes in how people prepare financially for their retirement, many are also starting to think about how they prepare emotionally or mentally for it. Many exiting the workforce will have spent 40 or more years working 5 or more days a week, with just a few weeks a year for vacations and other time off. They may not recognize it as such, but this gives them a definite purpose in their life, even if that purpose is simply to earn enough to pay the bills and look after themselves and their family.
Without that ‘purpose’ there can often be a void that needs to be filled – again, there is a lot of information available about how people need to think about retirement, but this TED talk is a great summary and well worth a watch for “those of a certain age” (like me.)
As well as changes in how people prepare financially for their retirement, many are also starting to think about how they prepare emotionally or mentally for it.”
How can financial service brands reposition to meet these challenges?
As consumers will be in the decumulation phase of their life where they are spending what they have saved and invested over the years, there are clearly lots of opportunities to support them with specific products and services that help them manage and spend their money. But as this is such a large, growing, and financially attractive cohort, brands need to ensure that they are well positioned to succeed. The key questions that brands need to ask themselves are these:
- Do we understand this audience well enough, both at an overall level and at the subsegment level? As with many areas of financial services, the audience will vary hugely in terms of their situation, their behaviors and attitudes, and it will be important to understand who you are dealing with and what they need from you. Segmentation studies can be valuable, particularly if they are brought to life via the building of personas.
- Do we have compelling propositions for this audience, and do they feel like they have been designed with them in mind? A lot of brands have focused heavily on millennials and Gen Z over the last few years, particularly in the Fintech space, so it will be important to ensure that the product and service offerings are not just relevant but genuinely meet the needs of this audience as they will have the time and knowledge to take their business elsewhere.
- Have we built sufficient trust with this audience so that they take us with them into this part of their life? Retirement is one of the times in our lives when we sit down and take a long hard look at all the products and services we use and the brands that provide them. Clearly trust has to be built over a long period of time, so brands need to start building that trust well ahead of retirement. In one of our thought pieces later in the year we will be looking at financial education, and this is clearly something that can be offered to consumers as they approach retirement to strengthen existing relationships and position the brand as a partner for the next phase in their life.
Over and above these key questions, brands should also be asking themselves whether the channel strategy is right for the audience (yes, digital will be important, but many will want some human contact for those important decisions), and whether the comms approaches are appropriate (and no, we are not all silver foxes who like to sail in our spare time).
If any of these are challenges you are facing in your company, feel free to come and talk to us as we’d love to help.