Baby Boomers Are Redefining Retirement

December 1, 1997
At age 71, Michelangelo was appointed chief architect of St. Peter's Cathedral in Rome—work he supervised until his death at age 89. Adolph Zukor was chairman of Paramount Pictures until he was 91. And George Abbot, the great Broadway actor, writer, director and producer, brought "A Funny Thing Happened on the Way to the Forum" to Broadway at age 75. He then topped that with the revival of his first hit, "Broadway," when he was 100 years old.

These later-life achievements used to be the exception to the rule. For the last 60 years or so, the majority of working Americans have chosen to retire at age 65, buy a condo in the sun and invest an absurd amount of money in golf club memberships and vacation cruises. Productivity? Forget it. Retirement was a time for leisure—period. Only a small minority of people remained gainfully employed in life's later years.

But it's all changing now as baby boomers—that teeming mass of humanity that popularized rock 'n' roll, the sexual revolution and recreational drug use—hurtle toward retirement age. Thanks to the sheer number of them, baby boomers have profoundly affected American life at every step along the age continuum.

When boomers hit school age in the 1950s, classrooms couldn't be built fast enough and many schools went into double sessions. When they went off to college, the number of college students nearly tripled to 9 million and 743 new colleges were opened. As corporate employees, they made casual dress the rule and demanded more flexible work arrangements and family-friendly benefits. Now, with the first boomers set to hit early-retirement age within the next four years, they will no doubt redefine the nature of that time-honored institution as well.

"Boomers make up 52 percent of the working population and are of an age at which they've reached managerial and executive positions," explains Rebecca Chekouras, vice president of research services for marketing solutions and information provider Age Wave Communication Corp. in Emeryville, California, and a baby boomer herself. "As the adult governing population, we're in charge. What we do sets the tone for corporate life,"—and for corporate retirement.

With one boomer turning 50 every eight seconds, a rate that will continue for the next 10 years, retirement issues are being pushed to the forefront of the national consciousness. But how will retirement be redefined? And why should it? Aren't a nice pension check and loud Bermuda shorts the goal of all burnt-out corporate employees?

Well, yes and no. Sure, we all want more leisure time, but not everyone can afford a fat and happy retirement. Furthermore, not everyone will want to stop working at age 65, especially boomers who derive a significant part of their self-esteem from their jobs. But regardless of what boomers decide to do about retirement, these aging workers will have a tremendous impact on corporate human resources. In fact, they already are. From recruitment and retention to compensation and benefits, every facet of HR management is being challenged as the average age of workers continues to rise, and the first boomers stand on the precipice of their retirement years.

Why the structure of retirement is changing.
In the "old days"—which still exist to some extent—Americans spent the first part of their lives, from birth to their early 20s, educating themselves in preparation for work. This period of education was followed by employment, often with just one or two companies, that lasted until workers were eligible for full pension benefits at 62 or 65. Upon retirement, Americans settled into a time of leisure and inactivity.

"This model of the life cycle is rapidly becoming obsolete," explains Richard Judy, a senior research fellow with the Hudson Institute Inc. in Indianapolis, and co-author of the 1997 study "Workforce 2020-Work and Workers in the 21st Century." In the not-too-distant future, Americans will be more likely to combine work, education and leisure throughout their lives, instead of breaking them up into three distinct periods.

This is happening for several reasons. First, people are living longer, healthier lives. When Congress set the official retirement age at 65 in the 1930s, the average life expectancy was only 61.7 years. But today, men can expect to live to 81 and women to 85—and these are just averages. Millions of Americans will live far beyond these mileposts.

Because older Americans today are healthier, by and large, than their parents and grandparents were, they're physically able to do more in later life. When he was 70, Jack LaLanne completed a 1 1/2 mile swim in Long Beach Harbor, handcuffed and shackled, towing 70 boats full of friends and reporters. LaLanne may be an extreme example—after all, plenty of 25-year-olds couldn't complete this feat—but he shows what the body is capable of when it's treated right. Boomers, who led this country's health revolution, will be physically capable of working and producing much later in life than any previous generation simply because they've taken care of themselves.

Of course, the ability to live and work longer has been helped significantly by advances in medical science that have virtually eliminated the life-threatening nature of many diseases. And as Judy says, "Because medical science isn't standing still, longevity may continue to increase even more."

With all those years standing in front of them upon retirement, many boomers will want to remain productive, especially because "purpose" has always been a driving force in their lives. "This generation has always sought meaning in their lives and in their work," explains Helen Dennis, director of the Andrus Institute of Gerontology at the University of Southern California in Los Angeles. "Boomers will look at retirement as a time of personal reinvention," she says. Instead of getting out of the rat race altogether, boomers will search for new opportunities—be it in employment, volunteer work, education or perhaps even starting a business.

It will be easier for boomers to pursue new opportunities not only because they're healthier, but also because increasingly, the work that's available relies not on physical power but on cerebral strength. Our burgeoning knowledge-based economy means that people will be able to work longer because the work itself isn't so exhausting. "People will find they can still be on the top of their professions in later years, unlike manual laborers who are simply fed up by age 55," Judy says.

But the picture isn't all rosy. While many aging baby boomers will be eager and healthy enough to continue some form of productive work well into their 70s or 80s, many boomers will have to remain working because of significant financial pressures. At this juncture, the future of the Social Security system has never looked so grim. Fortune reports that Social Security will be paying out more than it brings in by the year 2013—just 15 years from now—and will run out of money altogether by 2030. This is because the 76-million strong baby boom was followed by just 59 million baby busters, or Generation Xers as people in this group have come to be called. Because it takes approximately 3.2 workers to support each retiree, there will be far fewer workers than necessary contributing to the system.

But Social Security is not the only support system that's in jeopardy-pensions also are imperiled as more and more companies realize they simply can't afford the high cost of providing retirement income to their employees.

Because the crumbling pillars of federal aid and fat pensions can't be counted on for support, retiring boomers increasingly will have to rely on their personal savings. For many boomers, that won't be enough. The national savings rate dipped to an all-time low in 1993—just 2 percent of gross domestic product, down from 8 percent 20 years earlier—and it has only recently started to rise. Given their longer life spans, boomers have a lot of catching up to do if they hope to have even a bare-bones retirement income.

Put all this together and you begin to see what a good thing it is that boomers will want, and be able, to work in their later years. If current projections come true, they may not have a choice.

How retirement will be redefined.
So how, exactly, will retirement be redefined? Many different scenarios aren't only possible, but likely, to occur depending on the needs of workers and their employers. The first crop of baby boomers to reach early retirement in the next few years will be in a better position financially to take full retirement if they so desire. Why? Because they'll still be able to take advantage of company pensions and a relatively intact Social Security system.

But because they're still healthy and energetic, the more likely scenario is that boomers will choose to leave their place of primary employment when their employers say they have to (usually around age 65), and then they'll take whatever pension they have and direct their skills and energy toward more meaningful employment opportunities elsewhere.

"It sounds like a contradiction, but increasingly, employment is being seen as a viable option in retirement," says Dennis. Her opinion is supported by a 1993 survey conducted by the National Institute on Aging in Bethesda, Maryland, that revealed nearly three-quarters of older workers would prefer to retire gradually, phasing down from full-time to part-time work instead of retiring abruptly as many now are forced to do.

In the next 20 years or so, there's likely to be a great number of boomers working as independent contractors or consultants, taking part-time positions, starting small businesses or even working full-time for their existing employers if the companies will allow it.

Taking a longer-term view, the entire work/life cycle is likely to undergo a major shift, suggests Roger Herman, a strategic futurist and CEO of Herman and Associates Inc., in Greensboro, North Carolina. "I'm forecasting a series of mid-career retirements in which people work for eight to 10 years and then take a year off to pursue additional education, travel, open a new business, or [start] new careers," he says. "By interspersing work and leisure time throughout their lives, people can continue this pattern until well into their 70s or even 80s."

Boomers will impact HR.
But retirement or not, the aging baby boomers are going to have a significant impact on human resources in the next few years-just as they've affected every other facet of American life they've come in contact with thus far. Depending on their actions, they could:

  • Create a crippling labor shortage
  • Swell corporate benefits costs
  • Make flexible employment arrangements the norm
  • Ease the scarcity of knowledge workers
  • Revamp the traditional retirement structure
  • Create massive changes in this country's health insurance system.

And these are just the beginning.

In fact, there's no single element of human resources management that won't be affected by the stampede of baby boomers heading toward retirement. The only way to minimize the effect of those changes is for HR professionals to begin now to analyze their companies' workforces, anticipate the problems they'll face and then develop strategic long-term strategies to combat those problems.

A key advantage HR pros have in meeting this massive demographic shift head on is that many—if not most—of this country's top human resources executives are themselves members of the baby-boom generation. As representatives of their companies and of their generation, they're in an ideal position to accommodate the retirement desires of their compatriots while also meeting the business needs of their employers. But it will require our nation's HR managers to make some of the most difficult decisions they've ever had to tackle because it will bring into question the very nature of what employers can and should provide, what workers want and need, and what society will support. The social impact will be enormous. But the HR opportunity will be equally monumental.

George Burns, who performed as a comedian right up until his death at age 100, once had this to say about retirement: "Retirement at 65 is ridiculous. When I was 65 I still had pimples." As the baby boom fast becomes an elder boom, no doubt many members of this energetic and rebellious generation would agree with Burns. Boomers know what they want out of retirement. It's now up to business to decide what it can provide.

Workforce, December 1997, Vol. 76, No. 12, pp. 42-47.