A concept I have heard around the traps this year involves the removal of retirement income from our vocabularies and mindsets. There are industry notables who have also gone as far as saying the word retirement should be given the flick.
On the surface this seems a bold view. After all, there are financial advisers and fund managers who have delivered relatively successful retirements for thousands if not millions of Australians - and they've developed prosperous businesses in doing so. Why break or change the system if it isn't broken?
One of the major reasons Australia's wealth management industry is having this conversation is the nation's retirement system is starting to show a few cracks. One of the world's most respected pieces of retirement research - the Melbourne Mercer Global Pension Index - recently showed Australia's overall pension system has weakened. The nation's ability to ensure an individual's retirement is adequate and economically sustainable has been diminishing in recent years, the research says.
For more than a century Australians have followed a culture of working hard between the ages of 20 and 50, buying a home (or two) and making several longer-term investments along the way before slowing down the work, retiring and then living off investments. There is research in the marketplace to suggest this retirement culture is no longer - but we'll get to that in a moment.
The challengers to the notion of retirement income or retirement in general argue that Australia's ageing population, combined with advances in technology and healthcare, will be a great case study of people remaining in the workforce until their most senior years. It sets a scenario of little or no retirement, meaning individuals should invest to spend in the here and now - and do so for the remainder of their lives. Let's hold on to this thought.
Recent research from Australian investment platform Stake suggests there are a group of millennials becoming known as the FIRE followers (financial independence, retire early). They are ambitious individuals, reportedly expecting to retire by 50 and with up to $5 million in the bank. That's certainly living in the now!
Stake chief executive Matt Leibowitz said this group is a new breed of "independent and clued-up individuals who simply won't settle for anything less than independence, choice and autonomy to live by their own terms."
I would love to know how close these aspirations are to the lived reality in however many years' time. Also, what if this aggressive game plan goes belly up? Where's the safety net? The financial advice opportunities here would be immense.
Challenging the notion of retirement income or retirement itself is welcome. There is certainly a case for reshaping investment products intent on catering more to retirees because the demand will change as demographics and labour forces do. However, to totally remove the retirement concept is one step too far because the alternative - while exciting - carries many unknowns. That's not something I'd look forward to later in life.
This editorial was first published in Financial Standard Volume 16 Number 21, on 29 October 2018. Download a free digital copy of the edition here.