Will 2030 be the year retirement ends?

In 1980, the winter Olympics were held in Lake Placid and the Summer Games in Moscow. Ronald Reagan was elected as the 40^th President of the United States and Malcolm Fraser’s government was returned in Australia. It was also the year that Azaria Chamberlain disappeared from what was then known as Ayers Rock and CNN launched as the first ever 24-hour news channel.

It was also the year that the first millennials (or Gen Y) were born. In 2030, they’ll turn 50. In the same year, every Baby Boomer will be aged at least 65 and Gen Xers will start to turn 65.

2030 is the tipping point for our ageing population.

By 2030, in several developed nations, more than a quarter of the population will be of traditional retirement age. By then in Australia, 1 in 5 people will be aged 65 or older. The dependency ratio, or the number of people outside the traditional working age, typically viewed as 15 – 64 years, will extend to almost 57%, effectively creating an economy where less than half of the population is of working age. The old age dependency ratio is a key driver in this shift. Back in 1980, when our first millennials were born, the old age dependency ratio was less than 15%. By 2030 it will be well over 30%, marking a unique period of ageing for both Australia the global population in general.

On that basis alone, 2030 is likely to be the year that retirement as we know it ends.

The concept of retirement as we understand it today is relatively new, only really emerging during the Industrial Revolution, which drastically changed the nature of work. With more people working in factories and in manual roles, it became clear that older workers were less able to keep up with the physical demands of the new economy.

Germany introducing the world’s first state-run pension program in 1889, providing financial support for workers aged over 70, with Australia following just over a decade behind, with a specific constitutional provision putting the aged pension firmly under the control of the new federal government.

After World War II, the view of retirement as a period of leisure, rest and relaxation became dominant, especially in wealthier countries. Economic growth, increasing life expectancy, and a strong union movement helped secure pensions and retirement benefits, with superannuation becoming popular for white collar roles. But it wasn’t until 1992 that superannuation became compulsory in Australia at the comparatively low rate of 3% creating a three-tiered approach to retirement planning with the aged pension and private savings plans.

This newfound, relative wealth created an expectation that retirement would be a care-free period following 40 or more years of working, a concept which is likely to change again from 2030 onwards.

Right now, ASFA estimates that only 30% of Australians would be able to retire comfortably, under our traditional view of retirement, and that number is likely to reduce as the cost of living continues to rise.

Working beyond the traditional retirement age is becoming increasingly likely for many people, due not just to a shortfall in retirement funding but through other converging economic, demographic, and social factors.

Firstly, we are living longer. Over the last 100 years, average life expectancy in Australia has increased by 30 years to be 81.3 years for a man and 85.4 years for a woman. With this increase comes the requisite requirement for retirement savings to stretch over more years, often up to 20 or 30 years, and so for many people, working beyond the traditional retirement age isn’t something they’ll necessarily want to do, it’ll be something they have to do.

However, that’s easier said than done as our Voice of Experience survey shows. 53% of Australian’s have encountered ageism when applying for a new role in their 50s. If people want to keep working and if, as a society we need them to keep working, well into their 50s and 60s, then employers’ attitudes to midcareer and older workers needs to change.

Ironically enough, many industries, not least healthcare, education, and aged care, face labour shortages specifically due to the ageing population. Employers should already be looking to recruit and retain older workers, offering flexible schedules, retraining opportunities, and other incentives to keep people employed for longer.

Ageing populations are also putting pressure on social security and public pension systems. As more Baby Boomers retire and fewer workers pay into the system, there is a risk of funding shortfalls. Whilst we’re less likely to experience this issue locally, in the US, Social Security is projected to be depleted by 2030. After this point, the system will only be able to pay about 75% of scheduled benefits.

Given that it was the increasingly physical demands of post-Industrial Revolution roles that initially drove our first world view of retirement, it’s a little ironic that the less physically demanding jobs of the Fourth Industrial Revolution are helping to end traditional retirement. The nature of work has changed over the past few decades, and while manual labour jobs may still be challenging for older people, most jobs today are in the knowledge or gig economies making them much more extendable, not least through remote work and more flexible working arrangements.

So, by 2030, the concept of traditional retirement will undergo a major transformation due, mostly, to demographic shifts and financial pressures. The Baby Boomer generation will fully enter retirement age by then, dramatically increasing the number of retired people. This will strain social security and retirement savings, pensions, superannuation, and healthcare systems, as fewer working-age people will be available to support a growing elderly population. Both the general dependency ratio and the old-age dependency ratio will rise sharply, making it challenging for public funds and personal savings to sustain the longer retirement periods that come with increased life expectancy.

Economic realities will also play a key role in reshaping retirement. Many individuals will face inadequate savings and rising living costs, especially in healthcare, forcing them to continue working longer. Governments may raise the statutory retirement age to keep pension systems solvent, while employers, will hopefully, seek to retain older workers to fill labour shortages. The shift toward flexible or phased retirement, where people transition gradually from full-time work to part-time roles or new careers, is likely to replace the traditional notion of a fixed retirement age, reflecting the need for sustained income and ongoing engagement in the workforce.