Inequality dashes retirement dreams

The number of seniors under pressure to continue working is growing, making retirement out of their reach
By Lydia Lim, Associate Opinion Editor, The Sunday Times, 5 Jun 2016

I remember a recent conversation with two friends, a married couple, about Bob Buford's book Halftime.

In it, Mr Buford - a Texas tycoon who made his fortune from cable television - splits life into two halves; the first is a quest for success and the second, a quest for significance. In this paradigm, people spend the first part of their lives acquiring assets for themselves, including an education and a career, and the second part giving back. Today, the Halftime Institute he set up helps people in many countries, including here in Singapore, in their quest for meaning in life.

But this Halftime paradigm, I have come to realise, is relevant only to a small select group of workers.

The response of my friends was telling. While the husband shared my enthusiasm for the Halftime approach, the wife asked immediately: "Isn't Halftime only for professionals and others on good incomes? Most people have to work for money. They can't afford to think about meaning."

She would know since she runs a small business that aims to provide jobs for single mothers and other women in financial need.

Her question was a wake-up call for me because I had long viewed myself as enlightened in my thinking on retirement. When my father announced his plans to stop work, I quickly got him a copy of transitions expert Nancy Schlossberg's book Revitalising Retirement, which shifts the focus in retirement planning from savings - also known as one's financial portfolio - to identity, relationships and purpose, or what she terms "psychological portfolio".

Now, I see that those of us who have portfolios of any kind to speak of are the fortunate ones. There are many who do not. In fact, a majority of people may well have no choice but to work into their old age so as to meet their needs and those of their family.

That stark reality was underscored by a research note Bank of America Merrill Lynch put out last month titled: "The Silver Economy - Global Ageing Primer". The document is 232 pages long and in a service to its readers, the Financial Times summarised its key points so as to save them, it said, from spending their "best years on this beast".

The first point the FT highlighted was that the ageing story is also a story about inequality. Here's what it noted:

• Rich people live longer than poor people. The richest 1 per cent of Americans live, on average, 14.6 years longer than the poorest 1 per cent for men. The difference for women is 10.1 years. The gap has also been widening and it is linked to facts such as that poor people are more likely to smoke, less likely to have good healthcare and less likely to eat well.

• Ageing exacerbates rising inequality trends worldwide. In fact, retirement inequality is surpassing income inequality. According to the Organisation for Economic Cooperation and Development, one out of eight elderly people - or 14.7 per cent of those aged 75 and older - live in poverty, as compared with only 11.4 per cent for the total population. And according to the consulting firm McKinsey, the mean to median income ratio is the highest for the age 65-plus population, and has been rising since the 1980s. That is a measure of inequality as the mean or average is pulled up by incomes at the top whereas the median is the midpoint of incomes in a population.

Other publications have also highlighted these worrying trends, including The American Prospect magazine, which in its Spring 2015 issue carried an article titled Senior Class: America's Unequal Retirement.

In it, writer Teresa Ghilarducci wrote: "Inequality has been increasing in multiple ways. But one little-appreciated form is the inequality of retirement time. That's the number of years between retirement and death.

"It's not surprising that divergent retirement time should reflect other forms of growing inequality. The poor have lower earnings and often work longer out of necessity, not choice. They are less likely to have decent pensions or private savings. On average, they suffer poorer health and tend to die younger. On all counts, the affluent get to enjoy more years of retirement in relative comfort."

Ms Ghilarducci called for changes in social policy so those on lower incomes get a fairer deal in life's final quarter. "Ideally, people who start work at older ages because of more schooling - and who live longer because life treats them better - would retire at older ages. Workers with less education, earlier entry into the labour force and shorter life expectancies would be able to retire at earlier ages," she wrote.

"Yet, the opposite is occurring," she made clear, as "the vast majority of Americans over 65 in the bottom 90 per cent of the income distribution will likely have to work longer than the affluent, even as they also expect to die sooner. This is not a fair retirement system."

That got me thinking about Singapore's retirement system and how fair it might be.

Retirement adequacy has been a longstanding concern. It is about whether people have enough cash or assets salted away for their golden years, or if not, whether they can rely on family to support them. Fairness seems much less of a concern.

With the population ageing fast, the Government has in recent years moved to enhance the CPF retirement savings system by raising interest rates to help especially those with smaller balances save more and by putting in place a national annuity scheme.

It is also making it easier for workers to extend their working years by passing a law on re-employment to age 67.

Then there is Silver Support, a pension scheme for the bottom 30 per cent of seniors by wealth and income and the first of its kind here. The first cash payouts will be made next month to some 140,000 Singaporeans aged 65 and over.

Such changes are most welcome but are they enough to mitigate the effects of inequality in retirement, a phenomenon now apparent in global figures? Such figures actually lend weight to calls by a small number of local advocates for more to be done to help less well-off seniors age with dignity.

In 2014, former Straits Times senior correspondent Radha Basu wrote several commentaries on this issue. She drew a distinction between seniors who choose to keep working and their less-privileged peers who labour as cleaners and security guards well into their 70s. She quoted Dr Alexandre Kalache, the former head of ageing issues at the World Health Organisation, who had expressed doubts about Singapore's system and said: "I am all for active ageing, but if you have never had a decent job, don't know what job satisfaction is, to make you work till you practically drop dead is not human."

One disturbing trend is the rise in the number of older workers taking home less than $1,000 a month. According to Ministry of Manpower figures released in 2014 and reported in The Sunday Times, the number of such low-wage older workers doubled to nearly 35,000 over the past decade. The rise outpaced the natural ageing of the population as the number of residents aged 65 and above went up just 60 per cent over the same period.

That suggests the number of seniors under pressure to work well into their old age is growing. The psychological toll on them can be significant, with insomnia and anxiety among the ill effects.

For their sake, we as a society need to keep in mind the inequality that puts a restful retirement out of the reach of many. The privileged among us who have a choice, and that includes policymakers, would do well to remember the difference between seniors who work because they want to and those who work out of necessity, and strive to make the system fairer for the latter.