Is there a retirement crisis? Yes. Are changing demographics at the same time driving an evolution in retirement? Yes. Is the relationship between these two observations clear cut? Not at all.
At first glance, changing demographics – including an aging population and increased lifespans –make the retirement crisis worse for the simple reason that there is less money and it has to last longer. But there is another factor at work that doesn’t get enough attention. And that is the increased human capital found at what used to be the traditional retirement age.
By human capital, we mean earning potential or future wages. A college graduate starting her first job has considerable human capital (assuming forty plus years of earnings) and usually very little actual capital. By contrast, someone on the brink of retirement has very little human capital.
Today, however, people are working longer. Sometimes that’s a necessity but very often it is a choice. A 65 year old today has a longer life expectancy and is probably healthier and more active than a 65 year old of generations past. What’s more, in the US they are most likely in a non-industrial or non-labor job, meaning safety and physical capacity are much less of a concern.
Some continue in the same or similar careers, others work less and others start encore careers that often encompass some previous passion or find new ways to apply their experience. I would not be surprised to see even more people remaining economically active for five or ten years or longer beyond the “traditional” retirement age.