How the wealthy are redefining their retirement

The research has highlighted an interesting and, perhaps, unexpected phenomenon amongst wealthy individuals across the world. Instead of planning a conventional retirement or making plans to retire early, most of our respondents aspire to keep on working in some form - to become a Nevertiree rather than a retiree.

Some 60% of respondents say they envision always being involved in commercial or professional work of some kind, whatever their age.

The nevertiree entrepreneur

Dick Pyle, Proprietor of truffle-tree.com, says at age 67 he "can't really conceive of doing nothing." In his 40s, "retirement hadn't really entered my head." So Mr. Pyle, having moved to south-west France at 60, started two businesses - a truffle farm and a regional wine retailer/ wholesaler. This is a solution that combines work with a pleasant lifestyle, and some hard physical labour.

For Mr. Pyle, the most important thing about retirement is to have an engaging hobby to which one can devote oneself to, or to continue working.

Mr. Pyle has no plans to stop, and sees himself working for as long as he can. He also thinks that "attitudes to retirement will have to change." In his mind there is no way that governments and corporations will be able to fund pension provisions in their current stage, pointing out the way in which growing life expectancies now vastly exceed the official retirement age. He suggests linking the official retirement age more directly to average life expectancies, with individuals being given perhaps 15 years of pension-funded retirement.

What is particularly interesting is that this phenomenon is not limited to those who have become wealthy through entrepreneurship. In fact, the source of wealth makes relatively little difference to an individual's desire to keep on working. Those who have inherited their wealth, made gains through investments or property, or who have climbed the corporate ladder through employment also report a strong desire to keep working.

A desire to contribute

As Sarah Harper, Professor of Gerontology and Director of the Oxford Institute of Ageing at the University of Oxford says, "People want to contribute. They want to be doing something. Work gives people status, it gives them the opportunity to network."

Whilst our research shows that the Nevertirees are a global phenomenon, there are some quite marked differences across the world. Of particular note is that in emerging market economies such as Saudi Arabia, United Arab Emirates (UAE) and South Africa, very few wealthy individuals plan to stop working completely, in some cases fewer than 10 percent. Amongst the developed economies, the concept of Nevertirement is also popular, but to a lesser extent. Those most likely to desire a conventional retirement include Switzerland, Spain and Japan.

To some extent, this can be explained by age differentials - 59% of millionaires in the emerging markets are under 45, compared with just 16% in Europe and 21% in the US. But emerging market respondents' desire to keep on working may also reflect different social attitudes to the concept of retirement itself. Europe has now had five decades or more to adapt to the notion of provisioned- for retirement at around age 65. In contrast, this concept does not have deep roots in many emerging market economies. (Note that Hong Kong and Singapore, toward the bottom of the Nevertiree list, have long-established mandatory retirement savings plans.)

The desire to become a Nevertiree instead of a retiree is expected to grow over the coming decades. As we adapt to our increasing life expectancy and enjoy better health in later life than ever before, it is likely that increasing numbers of wealthy individuals will choose to keep on working in some form rather than opt for retirement. Our research backs up this hypothesis: Whilst 50% of respondents aged 65 and over say they always want to be involved in work, this figure leaps to over 70% amongst respondents under the age of 45.

Sarah Harper thinks increasing numbers will want to keep on working but not necessarily in the same role. As lead investigator on Oxford's Ageing Workforce Programme, she has recently completed a study on "Extending Late Life Work" and she says, "We do a lot of work around the importance of the age of 50 to 70 - an age when you're incredibly experienced, you've got so much to offer, but maybe want a second career. Maybe you want to do something different, or maybe you want to stay in the same work but in a different role."

Is retirement age relevant in a Nevertiree world?

Simply reaching the 'normal' retirement age is no longer regarded as an automatic reason to retire. Indeed, as the entrepreneur Gordon Gibb observes, "For most of the people I know and bounce ideas off of, it always has been meaningless." Sarah Harper agrees, saying, "Over the last decade or so, everybody has started to wake up to the fact that they're not going to retire as our parents or grandparents did, and then have 30 years of fully paid leisure with a high standard of living."

Even for the minority who are still planning a conventional retirement, the concept of a retirement 'age' seems out of date. Out of those survey respondents who have already retired, only 14% believe that simply reaching the normal age to retire was a "very important" reason behind their decision to retire. This lagged behind most other factors, notably having made enough money to do so (deemed very important by 58% of respondents) and ill health (51%). A desire to do something different was also important, as was no longer having an interest in working. The state of the economy, or government and taxation policies at the time, appear to be relatively unimportant factors in most individuals' decisions to retire.

As, indeed, is a 'traditional' retirement really that 'traditional'? Whilst the majority of survey respondents told us that they plan to keep on working in their 'retirement' years, there remains a group of wealthy individuals who are either already enjoying a conventional retirement or are planning to do so. However, what is interesting to note here is that even amongst those respondents who told us they are retired, a great number have found themselves involved in work pursuits on a part-time basis, or are seeking out opportunities to be involved again in the commercial world.

We asked respondents how they divided up their time now, and how they planned to divide up their time in the future. The results, as the table below shows, were in one sense quite predictable - people wanted to spend more time with family, travelling, pursuing their hobbies and socialising.

What is particularly interesting is that, even amongst those who don't count themselves as a Nevertiree and are planning a conventional retirement, the share of people wanting to keep on working part time increases as people approach retirement age. Wealthy individuals do manage to translate this aspiration into reality: in retirement, fully 40% of wealthy individuals say they are working part time. For some wealthy people, retirement may prove to be a bit duller than expected - and thus sparks a desire to return to some sort of work.

Increasingly, retirement is being viewed as an opportunity to follow dreams and to do something completely different: as US Author, Columnist and Actuary Steve Vernon puts it, "It is both scary and thrilling to think of changing your life around and doing something new."

The social entrepreneur

Dr. K K Tse retired in 2000 and was happy for a few years "relaxing, enjoying myself and travelling a lot." But this lifestyle soon seemed to be missing something. Inspired by "reading and meeting," he embraced a new career in supporting and nurturing social entrepreneurs - becoming the founding Chairman of the Hong Kong Social Entrepreneurship Forum. Acting through a network of wealthy and socially conscious individuals, this forum raises money for investment in self-sustainable social enterprises. (For example, helping reformed drug addicts establish businesses.)

Dr. Tse's enthusiasm for social entrepreneurship was driven by the realisation that, in the words of an old Chinese phrase he learned in primary school, he "had been looking at the world from the bottom of a well." By contrast, social entrepreneurship offers the opportunity to leverage the talent of individuals for large-scale social improvements.

Dr. Tse says he realised that he wanted work that was "meaningful and interesting," conditions that his current activity fulfills. But whilst he helps social enterprises get off the ground, he does not yearn to be an entrepreneur again himself. An entrepreneur, he points out, needs to be totally committed to his or her business; they cannot take time out for travel, something which Dr. Tse still much enjoys.

Dr. Tse thinks that attitudes toward retirement are changing and he wants to keep going for some time. As he says, "Stop counting the years - just make the years count."

In alignment with our research findings, Steve Vernon, US Author, Columnist and Actuary, questions whether what we consider to be a 'traditional' retirement is really that traditional. As he points out, this is the first generation of retirees that can look forward to spending perhaps 30 years in retirement. Fifty years ago, he notes, developed economy workers might spend only a few years in retirement and workers in emerging markets would not have considered stopping work.

Mr Vernon believes that individuals' attitudes toward retirement behaviour have not caught up with reality, either in financial or personal terms. Even for a wealthy person, it may be difficult to comprehend - and raise - the amount of money that is needed to fund 30 years of retirement. The possibility of ill health, and associated costs, casts another shadow.

He thinks that current attitudes toward retirement may change again, with retirees keener to work. Partly this will be driven by financial concerns, with the financial crisis of the last three years making individuals more worried about whether they can rely on existing investments alone. Partly, it will be encouraged by growing evidence that people continuing with some form of employment will have longer, happier and healthier lives.

Mr Vernon says: "One of the most fascinating pieces of evidence I've seen is evidence of people who work later in life actually being healthier and living longer than people who don't work. It's not necessarily working that helps you - it's really engagement with life, having a powerful reason to keep getting up in the morning." Broader economic questions will also increasingly be asked about many developed economies' ability to fund a large proportion of their workforce in retirement.

So Mr. Vernon believes that attitudes toward retirement will change, if slowly. There will be a number of challenges to overcome: for example, the attitude of younger workers who may think they are being denied a job by older workers remaining in the labour force - the so called 'lump of labour' argument. But he argues that these challenges can be overcome.

A case for coaching?

Not all preparations for the later stages of life - however defined - are financial. The wealthy need to think through what they want to do, and to prepare themselves mentally as well. For those who plan to keep on working, it is still important to plan what a work/life balance may look like as age increases - and for those who are planning a conventional retirement, the transition from working life to leisure can be a difficult one.

Helen Pitcher is chair of IDDAS, which provides mentoring, coaching and advisory services to senior executives facing career transitions. Some senior executives are moving up to the board level whilst others are stepping down, in retirement, to become non-executive directors or go into the not-for-profit sector.

"Most of the people we work with" says Helen Pitcher "resist retirement like mad." She thinks that this has little to do with money, but is rather due to their job providing a sense of self-worth. Men find the process more difficult than women.

What factors have driven this distrust of retirement? Helen Pitcher believes these factors include outlook, energy and life expectancy. As she observes "The average 55 year old is a lot younger than the 55 year old from 10 or 15 years ago." Whilst she thinks that money, at a fundamental level, does not lie behind decisions to keep working - the money still has to be there. Clients who are working to rebuild the value of a stock portfolio that has collapsed in value over the last few years may find themselves resentful of the fact that they 'need' to work - having previously suggested that they 'want' to work.

In addition to jobs providing a sense of purpose and meaning, at a more mundane level they provide a sense of time and structure to the day. The prospect of an empty day after retirement can unsettle. But rather than being panicked into rushing into whatever part-time roles are available, individuals need to think through what they have done with their life - and what they want to do. Some of these wishes, ignored before, may be possible now.

She also suggests that individuals take six months off between retirement and going into another role, arguing that they need to 'let go' of their executive persona. Ms. Pitcher reckons that, after the six months off, about 75% decide that they want to return to work; those that do not have perhaps connected to family or pastimes. Individuals who have retired young - maybe through selling their business and moving abroad - often have second thoughts a year or two down the road.

When individuals retire, they can move from being chief executive to someone at a different point in the command chain. As Helen Pitcher puts it, "The biggest change is to move from execution and control to influence." Often they realise that they have had 'positional' power for many years, meaning that if they simply ask for things to happen, they happen. Now they have to convince people why certain things should happen. Old habits can die hard, and she recommends to "always try to do it with humour."

Again, this comes back to a process of self-analysis and she notes that many of the most successful adaptors have started discussing retirement perhaps 18 months before it happened. At a time when boards are being encouraged to be more transparent about succession issues, this process can also be seen as desirable in a corporate context.

Ms. Pitcher believes that there will be a growing acceptance that people will be leaving the workforce later on in life. Retiring in your 50s will be seen as outdated, and there will be more people routinely on boards in their 60s and 70s. The positive side is that companies will be able to draw on the abilities of people who, for example, have experience leading firms through deep recessions. But one negative is that there may not be sufficient space for younger people to step up to the board level, if older people aren't moving over. Currently, Ms. Pitcher believes that this isn't a problem, as she perceives the pool of available people for senior appointments is not that large.