Why you'll never be able to retire
By Simon Collins
5:00 AM Sunday Jun 26, 2016
It is 17 years since compulsory retirement ages were banned by the Human Rights Act. Illustration / Rod Emmerson
Retirement has become an outdated concept for 140,000 New Zealanders who have reached 65 and are still clocking in to work.
And those in the workforce face a future without the dream of long holidays and time on the golf course, with just one in five people working today expect to retire by 65.
It is 17 years since compulsory retirement ages were banned by the Human Rights Act. In that time, older workers have trebled from 9 per cent of men aged 65 and over to 27 per cent.
Women in paid work aged 65-plus have leapt five-fold from just 3 per cent to 17 per cent.
The "young old" aged 65 to 69 are now more likely to be still working in New Zealand (39.6 per cent of them) than in 30 out of 34 OECD countries, beaten only by Iceland, South Korea and Japan.
Almost a fifth (19.5 per cent) are still working in their early 70s, higher than in all but four countries.
"The word 'retirement' doesn't have any meaning for a lot of people any more," says Dr Susan St John, 71 and still director of Auckland University's Retirement Policy and Research Centre. "The old idea that you get your gold watch and put your slippers on, play golf and get up late is no longer realistic."
A combination of factors - financial necessity, better health and dramatic changes in the nature of work - make the era of retirement by 65 look like just a short-term blip in human history.
Dame Cath Tizard passed today's retirement age 20 years ago but has barely taken her foot off the gas.
The former Governor-General and Auckland Mayor is 85 and still has much on her plate to keep her busy, whether it's the many campaigns and commitments she has been involved with or giving public talks as she did as part of the Royal New Zealand Navy's 75th Anniversary celebrations this week.
Just two years ago she was overseeing the Glenn Inquiry into domestic violence. "If you've got any get-up-and-go, you can always find something to do - there are plenty of voluntary jobs out there."
Dame Cath admits she never had a game plan for retirement. "I'd never given it much thought because my last two jobs had finite terms. So what do you do next? You wait and see what comes up."
Last month Dame Cath was at Auckland University for the graduation of her grand-daughter Jacqui, 21. Like many young people, thoughts of financial security by the time she hits today's retirement age in 2060 are the furthest thing from her mind.
"I'm more focused today on just finding a job and figuring out what I want to do with my life."
The science graduate looks to her grandmother and hopes she also has passions that will keep her engaged post-retirement. "I don't really see a joyous retirement where you reach a certain age and stop working," she said.
"I'd like to be active, healthy and happy - even if it means I stay working when I'm older."
The world in 2060 is almost unimaginable for today's graduates. There are jobs to get, partners to meet, weddings, children and a world getting smaller by the day.
It looks increasingly certain that "retirement" will be a quaint notion they laugh about as they tell disbelieving children it was once what everyone did.
If you've got any get-up-and-go, you can always find something to do.Dame Cath TizardFor thousands of years, people of all ages worked together in hunting, farming and domestic work as long as they were physically capable.
That legacy still lingers in our farming sector. Dr Michael Cameron of Waikato University says it is the only industry whose share of employment in every age group above 55 is above the national average, rising from 7 per cent across the whole workforce to 35 per cent of those still working at 85 or over.
Formal "retirement" arrived with the industrial revolution, as older workers could not keep up with machine-driven work and were pushed out.
The welfare state was created to support them, reaching a high-water mark in 1977 when Sir Robert Muldoon lowered the pension age to 60. But the tide turned only eight years later, when Labour imposed a surtax on pensioners' other income which lasted until 1998. The qualifying age was raised gradually back to 65 by 2001.
The average age of retirement, calculated by the OECD, dropped slowly for men from 70 in 1970 to 62 in 1997, and has risen again to 67. For women, it dropped from 69 to 60 and is now equal with men at 67.
On average, Kiwi men now work two years longer than in Australia, where the average retirement age is 65, and three years longer than the OECD average of 64.
Kiwi women work four years longer than women in Australia and across the OECD, which both average 63.
An online survey by the Retirement Commissioner suggests we will soon be working even longer. Only 21 per cent of those who have responded so far expect to retire by 65, 30 per cent at 66-69, 39 per cent at 70-75, and 10 per cent at older ages.
We are working longer for three reasons: because we need to financially, because we can, and because we want to. The Retirement Commissioner's survey asks: "What is the main reason that would influence or has influenced you to continue working past 65?" A majority (51 per cent) ticked the option: "Financially needed to continue working."
A Massey University study of people aged 61-77 in 2013 found 45 per cent of those still working agreed, and 43 per cent disagreed, with the statement, "I continue to work because I cannot afford to retire".
Those in that category were more likely to be renting, in economic hardship and Maori. Probably they were also more likely to be Aucklanders.
Most older people still own their own homes, but homeowners have shrunk slightly outside Auckland from 78.6 per cent of the 65-plus group in 2001 to 77.4 per cent in 2013, and more sharply in Auckland from 72 per cent to 67.3 per cent. Even heavier falls at younger ages mean growing numbers in future will still be renting in old age.
NZ Super pays $592 a week after tax for couples and $385 for a single person living alone. The mean rent in Auckland in April was $509 a week. "People continue working because the pension isn't enough to live on," says study leader Professor Fiona Alpass.
Secondly, as Professor Peggy Koopman-Boyden of Waikato University puts it: "They are working because they can. There is no longer anything legally that says you have to retire at 65."
And the vast majority are healthy enough to keep working.
NZ Health Surveys show that 88.5 per cent of people aged 65-74 now rate their health as "good" or better, virtually equal to the average for all adults (88.9 per cent).
Better health means we are living longer. A man reaching age 65 in 1952 could expect to live until 78; his grandson aged 65 today can expect to live to 84.
A woman reaching 65 in 1952 died at 80; today she will live to 86.
Alpass says the changing nature of work also makes it easier to keep working.
Most machine-driven industrial jobs have either been automated or moved offshore, and most jobs are now in services. They are also increasingly part-time and contract-based.
"There are fewer physically demanding jobs now, so people can work longer," she says. "It's now possible to have a kind of portfolio of jobs after 'retirement'."
Thirdly, people are staying in work longer because they want to. Forty per cent of people in the -Retirement Commissioner's survey say the main reason they will keep working past 65 is "value and satisfaction from work".
A Social Development Ministry survey of 65-year-olds in 2009, which let people choose multiple reasons they were still working, found the top four reasons were: "liked being busy" (92 per cent); "liked their work" (91 per cent); "felt they had something to contribute" (90 per cent); and "liked contact with other people" (83 per cent).
"Needed the income" came a distant fifth at 64 per cent.
Koopman-Boyden says she still researches ageing in her 70s because she enjoys offering her expertise. "It gives me a feeling of being useful and contributing to society."
It is hard to see a reversal of any of the factors driving people to work longer. "I think we are all going to work till the grave," says Alpass.
But she adds: "For some people, it hasn't [changed]. For people in low-skilled or highly demanding or not particularly fulfilling work, retirement is something they will look forward to, and for a lot of people it's a step up in income. They might have been made redundant in their 50s and not been able to get employed again, so getting National Super is a pay rise."
In other words, the income gaps that have widened in youth and middle age over the past 30 years may widen further as people in well-paid skilled jobs keep earning well into old age, and those who have struggled on lower incomes may have to survive largely on Super.
Increasingly, KiwiSaver will provide a little extra. But people would need to save more than $200,000 to yield a retirement income of $200 a week on top of Auckland rents (see box at right).
St John says this makes it crucial for New Zealand to keep its universal Super scheme.
On current settings, Super rates are 66 per cent of the net average wage for a couple, 60 per cent of the couple rate for singles living with others, and 65 per cent of the couple rate for singles living alone.
She favours shifting to standard rates for each individual, partnered or single, and reducing inequality by taxing superannuitants at 39 per cent on income above $15,000 a year.
"It's not like the old surcharge, which gave you very high and arbitrary effective marginal tax rates. It's a more sophisticated way of clawing back from the top 10 per cent or so," she says.
Older people should be able to do a mix of paid and unpaid "work".
"We have heard that 46 per cent of traditional jobs will disappear in the next decades [through technological change], yet we need important work to be done, whether it be in the environment, education or healthcare," she says.
"We have to make sure older people are supported well enough to do whatever they feel is their calling."
Out of the kitchen
After what once would have been a full working life as a chef, grandfather-of-four Tony Adolph is starting a new career as a kindergarten teacher.
Adolph, 62, has graduated with an early childhood education degree from the Manukau Institute of Technology. He has started work at the Pigeon Mountain Kindergarten at Bucklands Beach - and has no plans to stop at 65.
"I feel I've got a lot to give and I'd be pretty bored if I sat around doing nothing all day," he says.
Adolph joined the army at 21 and worked as an army chef for 20 years. "Since then I have worked as a chef on fishing boats and oil rigs, I ran my own business in Nelson, and then worked with adults with special needs," he says.
He moved to Auckland four and a half years ago to look after his parents, and stumbled on his new career by accident.
"By chance I did a bit of paving at one of the kindergartens," he says. "I enjoyed relating to the children and the head teacher suggested I should consider becoming a teacher."
He felt welcomed by the younger students in his class. "I had done lots of different things, so when it came to discussions about what it was like back in the day, I was a bit more knowledgeable," he says.
He got a student allowance for the first two years, despite changes in 2014 which removed the allowances above age 65 and reduced the lifetime limit for people aged 40-plus from 200 weeks to 120 weeks (three years).
He lost the allowance in the third year because his new partner, a teacher, was working. But he still qualified for a student loan, although loans have been restricted to cover only tuition fees for people aged 55-plus since 2011.
"The student loan just paid for my courses. To survive, I used all my savings," he says.
He had to stop studying twice, briefly, when his parents needed extra help, but his lecturers persuaded him to carry on.
"I really enjoy it," he says. "I feel it would be a waste of what I have got to give just to chuck it in at 65."
How much will it take?
Sorted's retirement planner lets you see how much you need to invest to achieve any goal for retirement income.
Suppose you're a 20-year-old male, expect to retire at the current average age of 67, and want a retirement income of $200 on top of the Auckland average rent of $509 a week until you die at age 87. Your target income is $709 a week.
If you expect to be living alone on NZ Super of $385 a week, the planner says you need to have an inflation-adjusted $268,451 in the bank by age 67, and to get there you need to start investing $86 a week now. If you're female you can expect to live to 90, so you need $298,827 by age 67, which requires investing $96 a week.
If you're a couple, aged 20 and want $200 each in retirement on top of the average Auckland rent (a target combined income of $909 a week), you need slightly less combined by age 67 ($292,210) than a female needs by herself, because you can expect a base income of $592 a week from NZ Super. You need to invest only $93 a week as a couple, or $46.50 each.
"Couples can accumulate a lot more than people on their own," says Sorted personal finance editor Tom Hartmann.
Obviously you need to invest more for the same target incomes if you're already closer to retirement. At age 40 you need to invest $173 a week as a single male, $192 as a single female or $188 as a couple. At age 55 you need to invest $417 a week as a single male, $464 as a single female or $454 as a couple.
• Source: www.sorted.org.nz/tools/retirement-planner
By Simon Collins
- Herald on Sunday