3 Ways Longevity Is Adding To ERISA’s Midlife Crisis

Midlife crisis, that period sometime between 40 and 60 years old, is often described as a time of transition. It’s a time when you suddenly start questioning everything—your job, your relationships, and even that hobby you loved for decades. Symptoms? Confusion on how everything seems to have changed and much of it not making sense. Concerns about whether I still fit in, where I am now, and where I am going? As Gen Zers often describe situations that don’t make sense, midlife is awkward. Perhaps the best description of midlife is that it's an awkward phase for grown-ups.

It appears that not just people experience a midlife crisis. Enacted in 1974, the Employee Retirement Income Security Act (ERISA) turned 50 this year and is experiencing a midlife crisis. ERISA laid the foundation for protecting employees and retirees. It was hailed as a game-changer, a legislative force that would protect workers’ retirement savings from mismanagement and insolvency.

ERISA, Born In A Simpler Time

When ERISA was enacted five decades ago, the world seemed more straightforward—its mission was clear: safeguarding employee pensions and providing a foundation for retirement security. But the years haven't been kind to the traditional pension system it was built to protect. Dwindling defined benefit plans and the rise of 401(k)s have created a new landscape not in place years ago. Technology, financial innovations, and workers' expectations for flexibility and portability are now part of a new workscape. These changes and others have spurred many to ask, what’s next for ERISA?

A New World Of Work & Retirement

The landscape of work has evolved significantly in the past five decades. Yes, globalization, the rise of the gig economy, technology, particularly automation, and, more recently, artificial intelligence, are at the top of any discussion about the future of work and retirement. Less often discussed, however, is longevity.

Earlier this month, I had the privilege to participate in the ERISA@50 Symposium in Washington, DC, hosted by many financial and insurance firms, non-government organizations, government agencies, and elected officials who are stakeholders in the business and policy of employee benefits. I joined a stellar panel, including AARP’s Jennifer Yarrish and Global Aging Institute’s Richard Jackson , skillfully led by Aspen Institute’s Karen Biddle Andres . We discussed many factors shaping the next 50 years of work and ERISA. Longevity loomed large in our fun and energetic exchange. Thanks, in part, to technological advancements, healthcare, and nutrition improvements, people live longer than ever. This demographic reality of what might be distilled down to simply having more time challenges not only traditional notions of retirement but also how we approach work and career and the types of risks that are the assumptions underpinning ERISA. Here are just three.

3 Longevity-related Risks For ERISA’s Next 50 Years

The Risk of Living Longer – Living longer does not necessarily mean longer retirements. Today, many people who might have been considered older workers in 1974 remain in the workplace. Many of those who do retire rejoin the workforce to become part of Generation U, or Generation Unretired. While many Gen U return to work to reduce the longevity risk of running out of money in retirement, others go back to work to stave off the wellbeing risk of endless days, weeks, and years sitting on the couch in front of the television.

Gen U are looking to work, but not in the way they may have decades earlier. They seek flexibility in what work means and how it fits into their later lives. They are looking for transitions or phased retirement rather than hard stops marked by arbitrary expiration dates imposed by yesterday's idea of work and retirement.

Part-time work, job sharing, gig work, and consulting are all part of a new life stage in retirement. Unfortunately, these work options often fall outside current employer policies and work processes. In some cases, despite well-intended government policy, regulations often make it challenging to impossible for employers to hire former employees.

The Risk of Taking Your Time – Longer life spans may change how we spend time across the life course. More years of life may signal to people the opportunity to take more time to live in traditional life stages that previously may have lasted only a few years or had a natural end with a life milestone, such as graduation. Likewise, entirely new life stages might emerge. Retirement as a life stage was invented just over a century ago. Even the idea of adolescence was identified only a few decades after that.

However, most employer compensation and benefits programs are modeled on a shorter predictable life stage model of adulthood. ERISA assumes an overly simplistic, near-perfect linear model of the life course from young adulthood to older age. It begins with education and training, finding a job, forming a family, grabbing the lower rungs of the organizational ladder in position and income, buying a home, having a child or two, climbing up the career ladder, purchasing a bigger home, and ultimately retiring – all neatly fitting into about three or four decades.

That is not altogether incorrect, but it is woefully incomplete for a new generation of workers. Longer lifespans and evolving lifestyles are challenging the traditional work and life course. Young adults are delaying or skipping many life milestones and, in some instances, inventing entirely new life stages.

For instance, more young adults live with their parents today than in previous decades. Around 45% of 18 to 29-year-olds currently live at home, the highest percentage since the 1940s. Half of people under 34 report not having a steady partner, spouse, or even a friend with benefits. On a related note, there has also been a significant decline in the birth rate. Each of these trends now occurs during a stage of life once associated with young adulthood, career building, and wealth accumulation.

Living solo without a partner, a mortgage, or children is likely to give a person more flexibility, a higher risk tolerance, and the willingness to jump to better employment situations than an employee who is shouldering the financial, housing, education, and health responsibilities of others. The career ladder is being replaced with a more apt metaphor of a career pogo stick, where younger employees hop from opportunity to opportunity. A survey of 1,100 Gen Zers indicates that 83% of workers characterize themselves as job hoppers and that job hopping has lost any stigma it might have had when ERISA was enacted.

While job hopping might lead to increased income, better work-life balance, and opportunities to develop new skills, it is not without risks. Each hop potentially interrupts participation in retirement programs, contributions, and employer matching. Frequent moves between employers may also result in the temporary loss of other benefits, requiring a person to use savings to pay for health or other insurance that might have been used for retirement or buying a home. Delayed life stages, frequent career moves, interrupted wealth accumulation, and retirement savings in young adulthood may expose workers to greater financial risk in older age – a life stage that may be significantly longer for them than for the population ERISA envisioned five decades ago.

The Risk Of Working Longer In A Faster World—ERISA’s original intent was to ensure retirement income security. Today's employees are navigating a high-velocity world of changing markets and fast-moving technology. Just imagine the possible changes in the global economy and technology over a work life extending over 50 or 60 years. The ultimate risk to financial security may not be in retirement but simply remaining competent, competitive, and adequately compensated across the work span.

The rapid pace of technological innovation is reshaping the nature of work, making it essential for individuals to acquire new skills throughout their careers. Education or skill security may become as important in the next 50 years as health and retirement security. Entire industries, let alone jobs, will disappear within a single lifetime. Others may emerge, but will a national education and training infrastructure be in place to reskill and upskill workers in their 30s, 40s, 50s, 60s, and beyond?

Early in my career (when I still had hair) I supervised a department of graphic artists that supported the production of technical publications. I recall walking into the graphics room to break up a heated argument between two of our most talented and senior designers. One of them passionately defended the accuracy of using a compass to draw, as he described it, “a true circle.” His colleague, a designer of the same age, was heralding the use of a new tool, a Macintosh computer, which could draw a circle, as he described it, “Not quite perfect, but good enough,” suggesting that it would soon replace his colleague’s steady hand and trusty compass. The days of a single career for a lifetime are fading fast and challenging the assumption that decades of employment with a single or even a few employers will provide health and financial security in older age.

Using Boston vernacular, ERISA is already “wicked” complex. Given rapidly developing changes in technology, globalization, and society, it is likely to become even more complex to respond to changes over the next 50 years. Those factors are hard to predict. However, longer lives and longer work lives are already here and are adding to ERISA’s midlife crisis, compounding the question of what’s next for ERISA?

I welcome your thoughts and thank my fellow panelists and colleagues at ERISA@50 for the fun exchange.

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