April 23, 2015

Is Retirement an Outmoded Concept?

Sometimes I wonder if the whole concept of retirement is destined for the dustbin.The idea of retiring from work is a rather new phenomenon. Some experts see it beginning around the turn of the 20th century, but it didn't become something that most thought about until fifty or sixty years ago, with the beginning of Social Security and strong employer pensions. Certainly my parent's generation welcomed retirement, and the majority of folks my age aspire to that part of life.

But, over the last few years I have watched at least five trends that seem to raise questions about retirement's appeal, or even viability. Consider these circumstances:

1. Savings rates can't possibly support full retirement. For those 45-54, the median amount saved for retirement is $100,000. For 35-44 year olds, the median saved is only $61,000. Even forgetting about retirement savings for a moment, 72 million Americans have no emergency savings at all. That is a whole bunch of folks who are one paycheck away from financial hardship or ruin, much less retirement.

2. The support of company pensions has all but disappeared. The defined benefit type plan is but a fond memory for most. Companies have been cutting the contributions and scope of pension plans for the last few decades. Poorly funded 401(k) accounts, or no pension at all, are more the norm. Future generations will likely never experience the option of a robust pension.

3. The likelihood of cutbacks in Social Security benefits and means testing for payments are virtual certainties in the years to come. There are too many folks retiring and too few workers to fund their Social Security payments to keep the system operating the way it does today. 

4. The amount of money needed to retire continues to rise. Thirty or forty years ago someone with one hundred thousand dollars in savings and investments, a decent pension, medical coverage, and Social Security could look forward to a comfortable retirement. Then, the "magic" figure became $500,000, quickly followed by one million dollars. Today, retirement gurus claim you need 2 million dollars to have a shot at a pleasant time away from work. Needless to say, 2 million is a number very, very few will accumulate; one million is impossible for most. 

5. Maybe just as important, the interest in continuing to work is growing. Due to financial concerns (see #1 above), wanting to continue doing something that is satisfying, fearful of free time with nothing to do, or anxious to start a new business and make a lifelong  dream real, the percentage of those who say they have no plans to stop working, or working well past the typical target of 65, is increasing. Some studies show it is nearly 33% of all workers. 


About a year ago I wrote a post that asked if retirement blogging was still viable. At that point several folks who focused on retirement had decided to close down their blogs, feeling that everything they had to say on the subject had been said. My question wasn't about the future of retirement, but rather the future of retirement as a subject for a several times a week blog.

One year later, I am now wondering about the reality of retirement in the decades to come. Has our world changed to the point where retirement isn't something the majority will ever experience, either by choice, or circumstances? Within the next few generations will retirement be as uncommon as it was 60 years ago?

What do you think?


30 comments:

  1. Bob, I truly don't know but as a fellow father of adult children I fear that my sons will not get the same opportunity that I fully expect to enjoy. I'm turning 56 shortly and am retired from the US military and am currently a civil service employee, have stocked away as much money for retirement as I can afford and feel comfortable that the numbers are looking good for me to punch out at 61. I have a lot of things I want to do that do not in any way involve federal financing, logistics and the other important yet monotonous details of my current worklife but retirement is needed to support those dreams. I DO hope that future generations can find a place where they can enjoy life as older adults.

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    1. You are not the only person who worries that future generations will not have the same chance at the opportunities that we, and previous generations, have enjoyed. The change in the world economy has been seismic and is not likely to go back.

      But, that begs the real question: do they want the same opportunities? Is the model of what constitutes a third phase of life shifting?

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  2. We only have about 1/4 of our "retirement money" in "retirement accounts" that the industry continues to point at. We were only allowed to save in traditional IRA accounts during our most intense income years. $2500-5000 did not make a dent in what we needed to save. Still we are comfortable with the amount we did save (well under the 3 million) because we have a fully paid for house within biking distance of a store. IF we make it to 95 we will probably be living with our kids (or they with us)to help make their ends meet.
    We had a conversation with our youngest (30) about their family retirement. He plans for no Social Security and now no military pension (new laws being passed). Since he started working he has put between 30-50% of his income into savings and rented out his first home. He feels there will be a movement to liquify 401 moneys in the future as well. He just is saving in regular accounts.
    I am thinking Alex Huxley & Harry Harrison may be closer to the truth then we would like to believe.
    Nope, I cannot worry about that ;)

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    1. You raise an important point, Janette. The amount of money someone can put a officially sanctioned retirement account (IRA) is quite limited and will never be able to fund a full retirement. Even with a slightly higher dollar amount allowed for those over 50, investments and savings in other forms are a necessity. I am afraid too many people think that the $5,500 maximum IRA contribution each year will be enough.

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  3. You pose a good question. I have a couple of friends who are older than I am and have been retired for quite some time. Both of these friends have nice pensions due to their time in the military. Without that, I don't know how they would manage. As for us, my husband will have a small pension as his company stopped funding it over ten years ago. I never had a pension. My husband plans on retiring at the end of this year. He has been with his company for over 35 years. They have asked him if he would consider working freelance for them after he retires but as of now he doesn't want to. He could work remotely as it does not require going into the office. I hope he will consider this since it is my fear he will be bored in retirement. As an artist, I make art every day so I can never retire from that. But I do worry about him. It is a very different situation from our parents and grandparents that is for sure. Uncharted territory really.

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    1. "Uncharted territory" is a good way to describe it. Your husband is lucky that he has been with the same company for so long and they value his services.

      One of the questions this post raises is one I hope comments will address: is retirement something to aspire to, or is it a concept that no longer works for many people? Has the world changed enough that the thought of leaving the work force at any age will no longer be viable for the next generation, or the one after that?

      And, if so, is that a bad thing? That is the real question.

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  4. Bob, you have summarized the situation very effectively. It is a completely different retirement environment now than it used to be. This post should be read by everyone over 50. Well done.

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    1. Thanks, Rin. After nearly 5 years of writing about retirement I am sensitive to what I see happening around me. I can't predict the future, but trends certainly seem to be leading us down a particular path that looks different from the one we have been on for the last several decades.

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  5. I think the idea of being at a level of financial independence, such that you don't *have* to work if you don't want to, will always be attractive to people. Unfortunately, many are unwilling to adjust their current lifestyle and spending habits to achieve that future. People spend everything they make and then go into debt to spend more. If young people starting out would just learn to live on 70% of their income and save / invest the rest, there wouldn't be a problem, they would have plenty to sustain that lifestyle into "retirement". Sadly, the concept of one sacrificing to achieve something is foreign to today's narcissistic mind.

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    1. What you say is true, but I wonder if point #5 in the post isn't a major part of the reason: the desire to continue working to feel productive and energized. After 14 years of retirement I know quite well that work in the typical sense isn't needed to feel fulfilled. But, our culture worships the concept of work and productivity and those are pretty powerful messages.

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  6. The concept of retirement that our parents may have had (largely retirement at a golf community in FL, since there were not a lot of alternatives) is very different from our generation (we can retire virtually anywhere in the world due to political and electronic changes, particularly for people like me who hate golf). I believe the concept of retirement, though, will not go away. People misinterpret their physical and mental strength since it is easy to say that one will continue to work well past 60 when they are 35 or 40. Retirement will be forced on some while it will be a choice for others. Anonymous hit the nail on the head - everyone would like to be at the point where you are financially independent enough to not have to work, but still choose to do so if that floats your boat. In every generation there will only be a subset of people who consciously make that a reality, but that doesn't make the dream any less real.

    So put me on the side of the people who believe the concept of retirement will continue to be something people aspire to in the years to come.

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    1. I saw some figures recently that made your point: wanting to work into one's later years (70's and 80's) may not be possible for a variety of reasons. Maybe retirement will continue as a viable option, but is it possible that it will be something more common at 70 instead of 62 or 65?

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    2. Unless people are able to overcome their physical deterioration, it will continue to be 65 or less. Use Social Sec as an example. In surveys the majority of people say they will take it at their full retirement age. What is the reality? A large % take it at 62, for any # of reasons. People may say it will rise to 70 but I don't see it changing from the current pattern until sometime well in the future.

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  7. I am thankful everyday for the pension plan that my employer and I contributed to for the past 34 yrs. I just had a call from the bank re: GIC investment renewal at 1.26% (1yr) - 1.3% (5yr). I am not a risk taker when it comes to investing my hard earned money. I shudder to think about retirement at 65 yrs and an "old age" pension with the cost of utilities, fuel, groceries, insurance, taxes. I was raised in rural AB where we weren't encouraged to spend all we had, let alone more than we had with credit. I do wonder about the current generation with their spend, spend, spend attitude on high square footage, the best of the best vehicles, out of the country vacations. Isn't retirement something that we all aspire to? We humans will eventually lose the physical ability to make a living. Then what?

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    1. Then what...exactly. I noted in my response to ChuckY that being out of work can happen without our wishes. Without adequate financial resources, then what? !

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  8. I couldn't have retired without a pension. It would not have been possible to save enough, despite my above average earnings and thrift. The pension, together with savings and as, give me a decent standard of living. I am concerned about the younger folks, especially since I got 2 degrees without loans. That is no longer possible.

    I think most will aspire to retirement. Most of us work for a pay check, not out of love for it. Retirement puts you in charge and, if you want to work, you can consider something you do love, even if it doesn't pay well.

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    1. This post has generated some interesting responses and since we don't know what will happen, it is good to speculate and think about what might be. My opinion has evolved over the years. I think a good percentage of those in their 20's and 30's probably don't see traditional retirement as an attractive choice.

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    2. In many ways, they are too young to know. This age category hasn't even begun to feel the harsh reality of the fragility and frailty of the human body. They believe, they will 'feel' the exact same way in the distance future as they do in their young adulthood. They have no conception that the years of employment of working long days have significant wear and tear on the body. Nor have they experience the stark reality that 30 years of hard saving disappear overnight with no fault of their own or that employment can disappear with a stroke of a pen. Traditional retirement maybe lost, but traditional employment has also lost its way.

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  9. I enjoyed reading your thoughts, as well as those of the readers. I believe the concept of retirement is in transition--more now than during our parents' era. Many of us have worked hard to make enough money to buy homes, raise families, give some away, and save some for later. Often, the careers that provided for our needs were more of a necessity than a pleasure. Perhaps the new "retirement" will offer us the chance to embark on new types of work or activities that might offer some income as well as feeding our souls. When I read about all the changes taking place in the world I can almost hear the Star Trek theme playing in the background. Sometimes it feels like the vast unknown, but there's comfort in knowing that we're not alone. Blogs like this enable us share our concerns and ideas, and I appreciate the help.

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    1. Thanks, Pam. I like posts that cause us to examine our beliefs and perceptions and alter them as required. Whether retirement continues as it is now or morphs into something else, we probably won't be around to see it. But, maybe our discussion can help someone think about their future and what they have to do to make it happen.

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  10. I think there will probably be a need for future generations to work longer, but I believe the attitude of employers will have to change a lot before we begin to see an older workforce.
    Many companies are too eager to trade the experienced, higher salaried employee for a younger, inexperienced one to trim the budget. Maybe it's just in my area of the country, but I don't see a lot of older professionals in the workforce. I've spent a lot of time in hospitals with my grandchild over the last eight years and I've been amazed at how young the nurses were. I never saw one over 40 years old. I retired from my teaching job at 57 years old and I was the oldest person there, other than one cafeteria worker. I'm assuming all the older healthcare professionals and teachers retired with good pensions, but what if they had needed those jobs? Would they have been allowed to remain on the job until they're 70? I really doubt it.

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    1. I think you are right, Glenda. Older workers have the experience and knowledge, but they come with higher health and pension (if such a thing exists) costs that too many businesses won't accept. The customer or consumer may suffer when the experience is gone, but the bottom line rules.

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  11. For me, it is becoming very clear that my retirement will probably be in phases with the first phase including quite a bit of work - but it is work that I want to do, in essence I will work for me, not an employer. Looking back at my grandfather's and father's retirement, it didn't appear to be that way, it was binary you were either retired or you still worked, no in between. I do agree with you regarding that old model, it's probably in the dustbin at this point. However, if my wife and I are lucky enough to make to the last phase of our retirement, I suspect that phase will be similar to the old model of retirement.

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    1. Retirement in phases with different blends of work and leisure is an excellent description, Scott. That approach is logical and seems to fit with the evolving nature of things. Likewise, working, but for oneself, is going to be much more common well past what has been the usual time to stop.

      I think you are dead on with this model of the "new" retirement.

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  12. Great, thought-provoking post! I think retirement will continue to evolve (looking at the difference between my parents' retirement & mine) and I do worry about the younger folks. I realize that I don't have a magic wand to "fix" their lives, so I'm worrying less! but it will be interesting to see what happens.

    Although I am totally enjoying my satisfying retirement, I do know a couple of folks who are not doing so well emotionally; I think much of it has always depended upon the individual and I don't see that changing.

    It was an early-morning wake up for my brain (& I would have read it yesterday but I spent the day taking one of those friends to an all-day medical appointment. Another reminder: health is essential for a satisfying life!)

    pam

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    1. Retirement does seem to be a phase of life that is unique to each of us.How we approach, define, execute, and make sense of it cannot be copied from someone else's journey. For those who are not happy with their retirement it is important that they realize they can change how this stage of life is unfolding. There are no rules.

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  13. Like Jane, my pension and social security are essential to my retirement. While some people don't need to work in retirement for fulfillment, many do. I think that there is no one retirement that works for everyone, and defining retirement simply as a leaving of work is a mistake, but I also hate to use FI as a definition for retirement. I think planning to work after sixty five is peachy-but I also think it would be a mistake to count on that income. One thing I will add-and this is not a "blame the previous generation" thing, is that with the current economy (realizing it is improving), many so called entry level and part time jobs that college students and graduates would be normally taking are now held by retirees who are working longer, or early retirees who were forced to work until retirement age or medicaid age....creating a viscous circle. I don't honestly think my kids have ever thought about traditional retirement-and I actually think that is okay.

    I'll add here, that I consider retiree to be the least of what I consider myself. If you were to ask about me, or even what I do, the description retiree would be side thought, although the label fits. More realistically, I'm a part time business person, quilter, artist, traveler who just happens no longer to be working and a traditional job.

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    1. I really like your final point about not defining one's life by being a retiree or not. That is only one part of what makes us who we are. And, after a time, if that is all someone is then his or her life is probably not all that fulfilling.

      Excellent comment, Barbara.

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  14. Interesting article Bob. I had planned to work only until 60 due to both pension, SS and a 401K. However, I am rethinking this as I find that the only truly bad part of work is waking up so early. Once I'm there, I'm fine. As well, DH and I do not have a large circle of friends, outside of family. I have many interests but after spending some time at home, I found I did not have enough to do and felt somewhat isolated. Hence, I am reconsidering early retirement. I liked another commenters suggestion about phased retirement. I don't know that I would truly want to retire completely. That being said, a lot will depend on the political climate at my work. A year ago it was so unbearable that despite enjoying my work I was desperate to leave. Changes have occurred which have led me to rethink my position. Right now, I am in a wait and see mode. I know I CAN retire at 60, whether I want to quit the workforce full time remains to be seen. Great article!

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    1. Isn't it great to be in the position where you can pull the plug if you want to, but don't have to?

      Phased retirement is the choice of an increasing number of folks. The idea of going from full employment to none overnight can be scary. Cutting back on hours, taking on a part time job after the full time one is over, starting a business or expanding a hobby into a side business (woodworking, quilting, tax prep...all sorts of options) are legitimate possibilities.

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