Everyone has a different idea of what retirement will look like, but most agree that retirement means ceasing to work and withdrawing from the workforce at the end of your wage-earning years. But as life expectancies get longer and the cost of living grows, many are reconsidering what retirement will look like when their time comes.
Is retirement permanent? Is it complete? Once you retire, does it mean you’ll never work again? Are you retired if you cut your working hours back to part-time or occasional work? Is going back to work perceived as a failure or something to be ashamed of? Will people assume you’ve run out of money and judge or pity you? Will working longer be seen as a valiant pursuit? Could committing to living very modestly and retiring early become more common?
More and more people are asking these questions. And many young people are facing the reality that they may never have the means to fully retire or even want to, especially with remote and flexible work options. Whether driven by financial deficiency (‘how will I survive?’) or a shortfall of the imagination (’what will I do?’), questioning retirement is becoming more common.
What Happened to “The Good Old Days” of Retirement?
If you’re a Millennial or older, you may remember your grandparents and perhaps your parents looking forward to retirement with confidence and little stress. For even lower middle-income households, a comfortable retirement could be achieved by paying off a mortgage, slightly cutting back on expenses, and living on a pension and Social Security with a modest nest egg. Retirees were able to spend time with the grandkids, take up hobbies, and maybe even travel with little financial strain.
But while this picture of “retirement” lives in our collective memory, history paints a different image.
Placed in historical context, this seemingly idyllic version of “retirement” only existed for a short period of time. When we were an agrarian society, and throughout the industrial revolution, farm and factory workers toiled until their bodies broke down or they died. For able-bodied people, lifelong work was a matter of survival and a fact of life. Adult children, churches, charities, and community members cared for elders who could no longer work.
Not long before the turn of the last century, the concept of retirement didn’t even exist. German Chancellor Otto von Bismarck often gets credit for “inventing” the idea when the government put its first pension program in place for people aged 65 and older. But at the time, life expectancy was only 45.
It wasn’t until President Franklin D. Roosevelt’s New Deal, which aimed to restore American prosperity during The Great Depression, that the Social Security program was established in 1935. But at the time, life expectancy in the U.S. was 62, and the retirement age was set at 65.
In the decades that followed, the concept of retirement changed. As the middle class grew and the idea of the “company man” took hold, the American worker tended to stay with an employer throughout their career. In exchange for loyalty, they could expect to be taken care of with a pension. After 10-30 years of working for a large company or organization, retirees would continue to receive some payment for life. It was at this point that the idyllic vision of retirement began to take shape.
By the late 1960s, most gainfully employed workers were retiring in their early 60s, and most of those people died in their early to mid-70s. So the last decade of life came to be seen as a time of relaxation, pleasure, and leisure—a reward well-deserved for a lifetime of hard work and dedication. It was a short time span, but one people looked forward to with confidence.
Is Retirement Becoming More Unattainable?
You may be wondering what changed. The answer is life expectancy. As longevity increased with advances in modern medicine, more workers reached their early 60s with many more years of vitality ahead of them. What used to be a window of about ten years has lengthened to nearly two decades on average in the 21st century.
Not only are people switching jobs more, but most employers are no longer willing to foot the bill for this extended period. In the early 1980s, about 60% of corporations still had employee pension plans. These days, only 14% of private-sector employers offer some form of defined benefit pension plan, and while 84% of state and local governments offer pensions, many of them are underfunded and in danger of being unable to pay out in the future. (1)
In large part, the tradeoff for longer life expectancy has become a shift to self-reliance in retirement. Social Security income isn’t sufficient to cover living expenses, and sizable personal retirement savings have become essential. But family and community support is no longer the norm as it was in the past.
Moreover, not only has full retirement become less attainable in your early 60s but it’s become less desirable for many adults. More people are hitting their early 60s, feeling young and vibrant with a lot left to give and no desire to stop working anytime soon.
Younger workers often complain that Baby Boomers need to get out of their way and retire already, citing outdated thinking and lack of tech skills. But it’s unfair and unrealistic to count them out too early. Jeff Bezos is a Boomer, the oldest of Gen X will be 60 soon, and workers the same age as Elon Musk, Larry Page, and Sarah Blakely really shouldn’t be expected to wrap up their careers over the next decade. Businesses and organizations could only benefit from that level of experience.
Reimagining Retirement for the 21st Century
Retirement planning is often limited to financial planning, while not much consideration is given to what day-to-day life will look like when the time comes. As many people experienced for the first time during the Coronavirus pandemic in 2020, social isolation can be detrimental to your physical and emotional health. This is something far too many retirees experience.
Staying active, creative, productive, and connected in your later years can mean a healthier, happier retirement. It’s not that working for a wage or salary is the only way to create purpose and meaning in your day, but working longer than your grandparents might not necessarily be a bad thing. The goal is to build a nest egg that will give you a choice, and you will not be forced to work longer than you wish.
Brendan is the Managing Director for Waymark Wealth Management. He has extensive experience in comprehensive wealth management. His focus includes retirement planning, behavioral finance, investment portfolio construction, education funding, insurance & risk management, taxes, charitable giving, and estate planning. Brendan has an ability to take clients' complex visions and distill them down to simple action plans, helping them move from where they are today to where they want to be tomorrow.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This material was prepared by Crystal Marketing Solutions, LLC, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate and is intended merely for educational purposes, not as advice.