Is the ‘Age Wave’ a retirement tsunami? — With Ken Dychtwald

As people live longer, retirement is becoming much more challenging for financial advisors and their clients as they seek to optimize their “golden years,” enjoy continued good health and implement strategies to deal with the challenges of aging. That’s the main message of gerontologist, psychologist and lecturer Ken Dychtwald, co-founder of the Age Wave think tank.

Dychtwald has spent much of his five-decade career developing the concept of the “age wave,” a population and cultural shift caused by the converging global demographic forces of the baby boom, increasing life expectancy and declining fertility rates. Dychtwald and his wife, Maddy, founded Age Wave, a think tank and consultancy with a perspective on the social, business, health care and financial implications and opportunities of global aging and rising longevity. Dychtwald has served as a fellow and presenter at the World Economic Forum and was a delegate and featured presenter at two White House Conferences on Aging. 

In 2022, Dychtwald hosted “The Legacy Interviews,” a webcast with notable figures in the field of aging and longevity that was turned into podcasts, a book and a 60-minute documentary called “Sages of Aging” that aired nationally on public television. 

In this interview with InsuranceNewsNet publisher Paul Feldman, Dychtwald describes what global aging and rising longevity will mean for the world of financial services.   

Paul Feldman: What led you to study the impact of global aging on business?

Ken Dychtwald: It has been a long, winding and fascinating journey. When I was very young, I became interested in the psychology of the body, what we came to call holistic health. I was asked to head up a big research project that was going to be conducted in Berkeley and focused on preventive health and well-being for older people. I was 24 at the time — that was exactly 50 years ago. My initial introduction to the field of gerontology was setting up programs initially in the United States and then around the world to help older people feel and function better.

What struck me was how interesting these older people were. We were living in a world where the focus was on youth and we seldom paid much attention to older people. They looked a little funny, they didn’t dress the way young people did and they were from another era. But I became captivated with their view. What’s it like to look at life from 90 years? What’s it like to think back over your satisfactions and also your regrets? In 1982 — a long time ago — I became a part of a two-year study project put on by the Office of Technology Assessment, which was the think tank of Congress; it was bipartisan.

The idea was that about 20 of us would travel back and forth to Washington every month or so and we would discuss how America would be transformed as a result of the aging of our population. That’s when I got exposed to this idea of demography. What I learned early on was that there were three forces at play. One was that people were living longer. That was utterly uncharted territory. 

Throughout 99% of human history, people didn’t expect to live long lives. But now they were beginning to. On the other side of the seesaw, the birth rates were dropping. After the baby boom came along, people started having smaller families, fewer kids. You look at those two together, and what you see is that the United States was going to be shifting its center of gravity to older adults.

Forty years ago, I set up a company, Age Wave, with the belief that businesses and governments needed to get off their youth kick and begin to realize not only that there would be more older people, but they were going to be a different kind of older person. What were the products and services and policies that would be needed to accommodate this utterly new phenomenon? Along the way, I’ve written 19 books and given talks to about 2.5 million people. I’ve advised about half the Fortune 500. It has been a wild ride. The truth of it is the subject is heating up now more than it ever has.

Feldman: We’re here now. We’re in that age wave, as you describe it. We have 10,000 people retiring every day. What are some of your more significant findings?

Dychtwald: First, most people are uncertain about who they might be in the years to come. There aren’t a lot of good role models for 80- and 90-year-olds. You’re in a stage of life that’s emerging, that’s new. We often think of “new” as being what the young people will do next or what new technology is going to happen, but not “What are 65-year-olds thinking about?” or “How they’re going to reinvent themselves” or “How much money does a 75-year-old need if they’re going to live to be 95 or 100?”

What happens when somebody finds themselves weary of their career but they still have a lot of life in them? How people are going to pay for their longevity is a nontrivial issue. That’s something major that I’ve learned. 

Another issue that really struck me is that we have not set up our health care system to produce healthy longevity. Is that anybody’s fault? I’m not sure. It may just be that we created a health care system for the acute problems of young people. Thanks to the breakthroughs of the 20th century, we’ve been able to put diseases like diphtheria, cholera, typhoid, syphilis and polio in the rearview mirror. But now we have all these chronic degenerative diseases, and our studies have shown that people are most frightened about cognitive health, Alzheimer’s disease. I believe that we ought to step up our research efforts and find a way to end the disease, not just produce more caregivers.

The main issue is, how do I get my health span to match my lifespan? What people would like is to live 80 or 90 or maybe 100 years and be reasonably healthy and vital and able to contribute throughout those years. The United States has done a crummy job of that. We are 50th in the world when it comes to how long we live. There are 49 countries that have a higher life expectancy than we do. 

But when it comes to health span, how many years do we live with reasonably good health? We’re only 68th in the world. The average American only will live, let’s say, 77, 78 years. It’s been backtracking a little bit during the COVID-19 years. But we will spend the last 10, 15 years of our lives in declining health, and that’s not what anybody wants. We’ve spent 100,000 years trying to make longevity happen, and now it’s happening, and we must figure out how to do it right.

Feldman: What is the impact of the age wave on the insurance and financial services industry? Is the industry ready for it? 

Dychtwald: First, I don’t think there has ever been a more opportunistic time for the insurance industry than right now. Why do I say that? There’s a whole new category of need and confusion and help required. In the past, we focused on investments for investments’ sake. Then, in the last 20 years or so, there was a lot of focus on accumulation for retirement, saving and planning for retirement. But then, all of a sudden, we have this extended life span; so you retire at 63 or 65, and you might live another 20 years. How does that work financially? We don’t even have good language to describe it. Sometimes it’s referred to as decumulation, but I’ve never heard an average citizen use that word.

About 80%, 81% of the population doesn’t really have a clue how much they’re going to need and how they’re going to pay for it. That’s a problem. Our parents’ and their parents’ generations grew up in the Great Depression and were very frugal. Also, they expected to live only a couple of years after they retired. And they were likely to benefit from the pensions that were put in place after World War II.

Beginning in the 1990s, a lot of those pensions started disappearing and people were put in the position of being responsible for their own retirement savings, and they’ve been doing a relatively miserable job of managing those savings. You have tens of millions of people in the United States — and multiply that around the world — who are looking at their later years and are thinking “I might need some sort of a guaranteed paycheck for life.”

This is particularly an issue for women. Women will be living five to 10 years longer than the men they’ve loved and cared for.

We need to make sure we’re mindful and thoughtful about what their needs are and what the products are and what the language is. Let me say one other thing about this: I think the field itself must become more user friendly. It must be more attuned to what really matters to people as they look at their longer lives. We also must be realistic that the programs that we’ve set in place, like Social Security, will survive over the next decade. Remember that when Social Security was crafted, there was a 25% unemployment rate in the U.S.

Partly what Franklin Roosevelt tried to do was to get older people out of the workforce to give young people a shot at making a life for themselves. In 1940, there were 42 workers paying in a little bit each month for each recipient and people were receiving only a few hundred dollars in benefits a year. Fast-forward to today, we have about 2.8 workers per recipient and people are getting on average about $21,000 to $22,000 a year.

You add to that this age wave, and it’s reasonable to question whether these systems will be able to handle the demographic force of what’s coming. I think individuals and families must understand what kinds of decisions they need to make in order to either work longer or save more or have some sort of an investment/insurance combination so that they can go the distance with financial peace of mind and security.

I would also say that there’s a problem in terms of the financial community, because about 32% of the population has a financial advisor, and that segment of the population tends to be financially well off. Two-thirds of the population don’t really have anyone to talk to. And people aren’t sure where to turn in this whole issue of “who can I be in retirement?” if the retirement will last 20 years longer than anticipated. You have traditional investment advisors, and then you have insurance professionals. They must find a way to be more integrated in a more holistic fashion so that the clients can get an idea about what’s the best path and the best decisions they need to make. Right now, it’s too confusing.

Feldman: How do you see that improving? What can the financial community do to get a better hold of this situation?

Dychtwald: I think that there are different approaches. If I were the head of a financial firm or an insurance company, I would add some training so that your agents and professionals can understand some of the broader questions to ask, just letting the clients know that you take their lives seriously and you want to know that their families are OK. Is there about to be a life event — a marriage, a death — that you ought to be tuned into? You already have a distribution force, give them some additional human-centered skills. That’s one approach.

The second approach is to partner. There is an organization called the Retirement Coaches Association, and they’re emerging. Maybe you find a retirement coach and you put them adjacent to your person or your team and they get called in and they participate in some of the discussions and people feel like someone is paying attention to them and they’re being asked reasonable questions.

There’s the unknown, there’s disaster, there’s illness, there’s loss. For example, studies repeatedly show that 70% of our population will need long-term care at some point in their lives. It may only be for a week, it could be for a couple of years, but they will need it. But only 30% of people think they will need long-term care. “No, I’ll be fine,” people say. “I don’t want to talk about that or think about it.” We must learn how to approach these issues in a way that doesn’t freak people out.

The financial services field must get better at letting people know that they’re responsible husbands, wives, parents, children. I have been to so many conferences within the financial community, and I sit in the back of the room before it’s my turn to speak and I hear lots of talk about product. I don’t hear a whole lot of discussion about people. 

People must understand what’s up ahead, to understand that retirement can be good. Offer some positive examples of that. Also, help people understand what decisions they must make to avoid any potential problems and give themselves and their family the best possible life.

Feldman: What do you project will happen in the field of longevity over the next 10 years? Where do you see this all going?

Dychtwald: I think there will be a handful of major dynamics that multiply. For me, it’s like popcorn in the microwave. My eighth book was a book called “Age Wave,” which I wrote 35 years ago. Almost everything that’s happening now I wrote about then. It’s not as though we don’t see what’s coming, but it is the fact that we avoid it. 

What are some of the big things that I think will happen in the years to come? I think that you will see a president of the United States in his ninth decade of life. How about that? It’s amazing what went on with Joe Biden and Donald Trump. These were two men who were older than anyone who had ever run for the presidency. We’ve grown to find that acceptable. You will see more 80-year-olds not just be president of the United States but be managers of football teams and be teachers in high schools and running companies. It just will be more normal. 

Second, I think you’re going to see a lot of drama around the Social Security and Medicare scene because the numbers don’t add up in the years to come. Right now, those systems are set up to go bankrupt or belly up in 2034. Big changes must be made to avert that. People have avoided doing anything about that because older adults don’t want to have their benefits messed with, and they’re heavy voters. Someone must find the right way to talk about these improvements so that it seems fair. 

A third thing is, we need some breakthroughs in medicine. We must put an end to Alzheimer’s. I’m hopeful that it happens. I look at the frontiers of science and research, and I see vaccines being developed to prevent Alzheimer’s. I see extraordinary new technologies that are about to come along in the CRISPR zone where we can rewrite the DNA so that our brains stay healthy for life. I think that’s coming in the next 10 years. 

I think that marketing and advertising must snap out of their youth obsession. Here we are now in the modern age where more than 70% of all the wealth in this country is held by people over 50. This age group is far more open to trying new things, and new things are coming along at a lightning pace. They are buying stuff for their kids and grandkids, and they are also reimagining their lives. It’s a fantastic audience for a wide range of products, from pharmaceutical products to home renovation to leisure, recreation to gaming. 

I think that you will see more and more creative minds decide to target older adults. But we have this new feeling of being a 60-year-old and this new weight of financial power that we’ve never encountered before among an older population. Those are the big changes I think we will see.

Feldman: Because women survive longer on average than men, they control trillions of dollars as their husbands die and they inherit that wealth. That demographic is not addressed as far as I can see by the media, marketing or advertising.

Dychtwald: This is not some marginal little group of people. This is where almost all the wealth will be held and where most of the buying decisions will be for everything. I’ll give you an example. We have 78 million grandparents in this country, and I guarantee you very few people know when National Grandparents’ Day is. Nobody pays attention to it. It’s considered irrelevant. That’s a big mistake. We can’t think of this new over-50 population as one big group. It’s 55-year-olds, it’s 75-year-olds, it’s healthy people, it’s people with a health challenge, and it’s women who are becoming the financial breadwinner.

Feldman: What are the major roadblocks in the financial world for what’s coming with the age wave.

Dychtwald: There are a couple of serious roadblocks that must be dealt with, and you can’t avoid it. Number one, we must integrate the accumulation and the decumulation territories.

Second, you must learn as much about people as about their money. We just did our big research project in the health field, and we learned that people wanted their health professionals to know what mattered to them more than what was the matter with them. They wanted them to know what mattered in their life, how they define health, what they enjoyed, the reasons they wanted to be healthy. I think the financial community is far more focused on the numbers and the financial plan, which are important. But if you leave out attention to the individual and to what matters in their life, you will lose a client.