Finance

The Making Of Generation U & Why A New Model Of Retirement Advice Is Needed Now

You may not know it but you are a lab rat. Don’t be shocked or offended, you have lots of company. Nearly two-thirds of us who joined the workforce in the 1980s, and everyone since then (this means you X’ers, Millennials, and Gen Z), are part of a grand experiment in retirement. The experiment began four decades ago with the disappearance of defined benefit plans, along with the financial certainty they offered, and the birth of promising, but less certain, defined contribution plans, e.g., 401(k)s. However, over the last 40 years uncertainty in retirement has evolved to include complexity far more than money — giving birth to a new generation, Generation U, Generation Uncertain. A new generation in need of a new type of retirement advice.

Unlike other generations that are defined by their birth year, Generation U is best defined as those that will not enjoy the retirement income certainty of defined benefit programs that provided a monthly pension check to many people of our parents’ and grandparents’ generations. Instead, we unwitting members of Gen U will experience the thrill ride of bodysurfing the ebb and flow of markets.

That said, not all of Gen U have participated in a 401(k) program. Over the last decade the number of gig workers has increased by an estimated 6 million people. According to the US Department of Labor, 55 million people may be a gig worker. That’s ~34% of the labor market. Moreover, a third of these workers are 55-years old and older. The rise of Gen U gig workers means far more people may be facing an uncertain financial future.

It is not financial uncertainty alone that characterizes Gen U’s retirement future, it is the context of how life itself in older age will be far more uncertain than it was for previous generations and how most are unprepared to navigate longevity. The novel life and social context that Generation U is retiring into demands a new type of wholistic advice to help them successfully navigate longer life and life in retirement.

Here are just a few.

Good news. You are likely to live longer than your parents. Bad news, you don’t know how long and whether your lifespan will outlive your wealth span. Statistics suggest that more than half of us will make it past 85-years old. Have we saved enough is one question. An equally important question is, have you planned for all the things necessary to live a quality life well into your old age?

Planning to work longer to extend your wealthspan? Great idea. Question: how’s your health? How’s your loved one’s health?

In decent health living longer is a gift, so what will you do with all that time? How will you cash in your longevity dividend? As I have written in previous articles, this is one-third of your adult life. Time with grandchildren, travel, 3,000 rounds of golf, and a few cruises will not fill 8,000 days of today’s retirement. During every previous life stage you have had parents, coaches, counselors, advisors, supervisors, and even books to advise on ‘what to expect when….’

Where are you seeking advice today on how best to live in older age?

Your parents had defined benefit plans (a.k.a. pensions) that promised guaranteed income. They had something else that was even better. They had you.

Young baby boomers did not keep pace with their parents in the baby-making department and each successive generation has had fewer children contributing to record low birth rates. Even those households with children may find that their adult children are too busy or live too far away to provide support. This is not about missing hugs. As the MIT AgeLab’s CareHive Consortium research has found, adult child caregiving and support includes the phone call to say “hello” as well as help with the increasingly arduous tasks of home maintenance, transportation, grocery shopping, healthcare, and much more.

Sadly the largest group of people filing for divorce are the oldest members of Generation U, couples over 50-years old. Yes, so-called gray divorce is real. Just when near retirees, mostly men, thought they would have more time to spend with their spouse — they and their partner find they are spending that time finding separate places to live. Divorce is more than a financial factor, it is a tectonic shift in how most people planned to live in older age.

At some point many people will be living solo, that is, alone. Singlehood, divorce, widow or widowerhood, and critical health issues contribute to a rising number of older people living alone. Due to the physiological luck of the draw this is more likely to be women. However, few members of Generation U have had a conversation with a financial professional, or anyone, on how they will live alone in older age, let alone how to identify the services they will need and how to pay for them. Ask yourself, have you identified, let alone financially planned for, someone you would trust to enter your home when you are alone and far frailer then today?

Yes Gen U we are the lab rats of longevity and the new retirement. You will be the first to show succeeding generations how to plan, prepare, and live in unprecedented uncertainty. Who do you turn to for advice? Where do you find trusted information that helps you anticipate challenges you have not considered in that one-third of adult life we presently call retirement? Even if you are financially secure, or even wealthy, do you know how you will navigate the new context of life in older age? This is the new frontier of longevity planning, not simply today’s practice of retirement planning.

Financial professionals — take note. These challenges and issues are discussions and value-added advice that the best of fintech and robo-advice have not cracked. In short, there is no app for that. Becoming a longevity planning resource to Gen U is your strategic competitive advantage.

Retirement product manufacturers — managing uncertainty is not just about the promise of guaranteed lifetime income, it is about fitting trusted products and services into a new longevity preparedness narrative that fills in practical needs and emotional gaps, not just portfolios.

Employer plan sponsors — this is the content your Gen U employees need to hear to plan for a quality retirement and to answer the question, “if I retire, then what?”

Families — this is the conversation to have with loved ones to identify wants and preferences long before they become part of a crisis and an immediate need.

So fellow members of Gen U, see you out there in the longevity retirement maze.


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