In the Personal Finance world, the issue of retirement is often either:
- Neglected altogether; or
- Worshiped at the altar
I guess if you had to choose one, you’d usually end up better off worshiping than neglecting. But are these really our only two options? After all, who exactly made “Retirement” such an integral part of the American Dream?
I’ve been really contemplating these questions for the past couple of months and would love to get your feedback. Here are some of my reoccurring thoughts on the issue:
The Original Need For Retirement
First, it would do a lot of good to get familiar with the original purpose of the modern concept of retirement. Our society’s fetish with retirement is still a relatively new concept. It wasn’t that many years ago that the New Deal spawned a series of ideas that would quickly mold our modern view of retirement.
You see, during those intense times it was becoming increasingly necessary for our government to find a way to encourage an aging generation to make room for the new horde of young, frisky, and most importantly, unemployed generation. It was a very tough time in our history and the public was demanding drastic action. The forces-that-be decided that the fastest way to implement the much debated Social Security Act was to have it paid from payroll taxes. In other words, the “retirement” of this generation would be paid for by the workers of the current generation.
Starting after the Second World War, our society started to push the concept of retirement even more and more. Suddenly, making it to 65 and retiring was our ultimate goal. Work diligently, pay your dues, and you’ll be able to retire with a little dignity. To be honest, this sort of system does have its benefits. If wages continue to increase, housing pricing continue to climb steadily, and population continues to explode, everything else just falls perfectly into place. For over 50 years, we’ve been able to hold the pieces of the puzzle firmly together. In more recent years though, the holes in the systems are starting to show.
Do We Still NEED Retirement?
Times have changed.
You no longer need strong back and able body to excel in the workplace. Being bigger, stronger, and faster only has advantages for a very small percentage of the population who are professional athletes. The evolution of both the computer and the internet have ushered in our current information age. The nature of business no longer favors someone just because they are young and more energetic. Business now rewards those who possess both the ability to rapidly obtain and interpret information, as well as the ability to comfortably adapt and evolve.
In addition, the life expectancy is no longer 63 years old, as it was when retirement age was set conveniently at 65. It risen over a decade and a half to just over 78 years!
It’s completely reasonable to work efficiently and effectively well past even 78 years old. The often cited and well-known story of Colonel Sanders was that he never even fried a chicken until age 40. Even then, the first KFC wasn’t franchised until he was 65. Whether you like Kentucky Fried Chicken (or Kentucky Grilled Chicken, whatever) or not, his story is a powerful testimony against retiring too early.
Sanders was one of a minority that went against the retirement curve of his time. Admittedly, part of his ingenuity came out necessity. Nevertheless, we can learn from his persistence towards seeing your passions through to fruition, regardless of age.
As the nature of our business continues to evolve and the expectancy of our lives continue to lengthen, it’s becoming more and more clear that our initial needs for “retirement” are becoming obsolete. But putting these tangible needs aside reveals an even bigger and more important question…
Should We Even WANT To Retire?
My biggest beef with our society’s current model of retirement is the underlying assumption that leisure is more fulfilling than work. After all, for over half a century we’ve been focused on working like slaves in order to be able to “retire” someday. This fiction concept of retirement was that all of our worries and problems would magically dissolve as we played shuffleboard, bridge, and met each other for Sunday brunches. Obviously, this is never the case.
Don’t get me wrong. Many retirees choose to spend more time with their growing families, start traveling, and even volunteer time to worthy causes and organizations. That’s all powerful stuff. However, all to often in reality we sacrifice family time, delay traveling, and ignore worthwhile pursuits upfront in order to pack them all together starting at age 65.
Do we really have to follow this sacrifice-and-cram mentality? Can we shift our “shoot for 65” mentality to one that focus on aiming for lifelong fulfillment? In this day and age, we hardly have any remaining excuse for not initiating the alignment our passion, our work, and our purpose. These no longer have to be independently moving parts in our life.
If you are willing to buck social pressure and regain control over your financial life, you can unlock many more doors to following your passions. Instead of sacrificing the things we discussed above, Courtney and I have made the decision to sacrifice the nice car, the starter home, and constant debt payments. We’ve pledged to simplify our lives as much as possible in order to capitalized on the increased opportunities to truly follow our passions.
Is this the magic solution to happiness? I doubt it. But I certainly think it’s an upgrade from the outdated model we’ve come to know so well. Chances are your life and your circumstances are drastically different. Regardless, we both know everyone has the opportunity to spend time getting in touch with their true passions and purpose now. There is no reason to wait.
All things considered, here’s my challenge for you:
- Stop obsessing over retirement calculators, dreaming about life decades down the road.
- Start devoting that time/energy to becoming intimate with your passions and purpose.
- Stop viewing your working life as a separate and negative force that is only conquered by “retirement”.
- Start taking steps today that foster the alignment of your work, your passions, and your purpose.
How To Retirement Early And Never Have To Work Again
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Just discovered this website and this article post.
Brilliant piece. And I agree with the point about what is it that you are “retiring from”.
For myself, (I’m middle aged), I’ve “retired” already. Retired from the corporate world to start my own web-based businesses. I no longer separate my life-time into work, weekends, vacation and retirement. So the concept isnt valid for me.
I used to have private pension plans. Not any more. I wouldn’t touch any of those products ever again. Take control of your own investment and future, don’t give it to these insurance companies to gamble with and cream off their profit.
Also I think conventional retirement makes little sense to the economy. We are creating a massive group of people – retirees – who are basically long term unemployed and have to be carried by the working population. The developed economies are finding out that they can afford this less and less as people live longer and the percentage of this group increases. It’s based on an old industrial age era when people had hard dangerous jobs and only lived a few years further than the retirement age – if they even got that far.
I also think “retiring” is age-ist. This idea that work and jobs must be kept only for people below a certain age group and the rest must spend the rest of their time being “retired”.
But whether the majority of people think the same way as me.. I don’t think they do. Most still see things in the old way. We need to change our attitudes!
Financial Samurai says
Kevin, I agree with your thoughts on retirement being an outdated concept. You sound like the path I’m looking forward to taking. I’ve done the corporate gig for almost 15 years, and I’m looking for a change given it’s been so fun to write on Financial Samurai, Yakezie, and here on Untemplater. Now, it’s just about building products around these brands.
Attitudes take generations to change. But, we’re changing slowly but surely!
Steve Spalding says
What’s interesting, coming from someone who works with entrepreneurs all day long, is that people who “live their passions” are some of the happiest and most fulfilled people I know. These are people who don’t even consider retirement in any traditional sense, they are much more interested in the idea that they will be able to do what they love to do better, make enough money off of it to sustain their lifestyle and make real, lasting changes to the world.
These are all powerful concepts that might not have been open to the majority of us 20 or 30 years ago when the means of production where in the hands of the relative few.
I think people need to really think about what it is that they are retiring from, maybe they will see that the problem isn’t being able to quit what you’re doing 40 years from now and do something more interesting it is that you aren’t currently doing something interesting and it might be time to rethink your priorities.
Lance S says
I’ve been thinking a lot about my life priorities lately, namely career vs personal life, corporate stability vs high-potential/risk entrepreneurship, etc. To me, retirement is nothing more than financial freedom. If you have enough money, you don’t have to wait until you’re 65. Depending on the kind of lifestyle you want later and the kind of sacrifices you want to make now, many people could retire early if they want to. It’s all about balance, and specifically, the right balance for you. Some people like the long summer break before school starts in the fall, but maybe some prefer having a long weekend every week.
Do we need retirement? Many (probably most) do. Some people are as energetic when they’re 70 as when they were 20, but most aren’t. Depending on your outlook on life and how life treats you, it can be easy to get worn out. And the problem is, people change. Maybe now you think you’ll always stay sharp and energetic, but maybe your mindset will change.
In high school, you were told that high school grades don’t matter, as long as you get a good GPA in college. Once you get that college degree, nobody will ever look at your high school grades again. In college, you were told that your GPA doesn’t matter. Once you work for a year or two, it’s all about your work experience. What nobody tells you is that it’s easier to do well early. If you have good grades in high school, you might go to Harvard and land a nice job no matter what your college GPA is. If you have a good GPA in college, you might also land a nice job, but high school is a lot easier than college (especially with all the fun distractions). If you didn’t have good grades and land an okay job, then you could work your way up and prove yourself. But you probably won’t start with as a salary (and this affects your subsequent raises) or get handed as many opportunities to prove yourself. Plus, especially in large companies, not only do you have to do great work to move up quickly, but you also probably have to play some politics and work the system (not as straightforward as getting a good GPA). Assuming you don’t completely drop the ball later, doing well early is a lot easier.
So what does this have to do with retirement? Well, the earlier you start saving for retirement, the more interest you accrue and the easier it is later on. The less you save, the more pressure you put on yourself to perform later. If you’re old and lose a hand, grow weary, or just don’t want to work, then you have less options. Retirement, for the average person, is the safe and attainable bet.
In an ideal world, everyone would do what they love and still be able to pay the bills. I’d love to be a respected and wealthy philosopher, but unfortunately I wasn’t born 2000 years ago. What if you love to sing? Only a few people can make a living doing that. For most people, making money doing something they love is a luxury they can’t afford. Doing what you love is just a hobby. Turning that hobby into a career involves being really good at it, working hard at it, and probably having the stars align in your favor. Some people are perfectly fine with a moderate income and minimal possessions, but a lot want the newest iPhone.
Retirement is just another word for “freedom to do what you want”. Those lucky few who can make a living off of their passions are rare. The rest of the population doesn’t have much of a choice. Besides, is striving for a long-term goal such as retirement such a bad thing?
This is probably a very disorganized post, since I just wrote whatever came to my mind and didn’t really organize it. But thanks for the food for thought!
You guys hit on something I’ve been thinking about for awhile. I can’t imagine completely retiring – I would want to keep working in some capacity to give myself a reason to get out of bed in the morning. Often the assumption is that your retirement income should be 80% of your pre-retirement income, but if you keep working that percentage can be much less, and you can start saving more for things you want to do before you hit 65. i’m going to do the math on this for myself – I admit I’ve been following the standard advice for retirement savings, and I should figure out what’s best for me. I still need to keep in mind my company’s matching policy – that’s still free money.
People really need to save based on goals they make for themselves, not just what people suggest they do.
I do agree that most of what you are saying and we should spend time enjoying our lives. With that said, I don’t want to write articles when I’m 55,65, or 78. I don’t think enjoying life an retirement have anything to do with each other. I am sure the that mr Sanders only did it pass the ripe old age because he loved it. What about the people that love to do run track, what will they do after their knees give out.
There are a few billion people on the planet and they all can’t do what they love. I wish they could , but that’s just not the case. Retirement planning is an important part of our society and will be for many decades to come.
The point I’m trying to make is, we should enjoy our lives and plan for the days that we can’t or just do not want to do what we love any more. Yes, retirement should be the “end goal” for us, if we are fortunate enough to do something we love and still able to do a 78, then your kids will only get a bigger inheritance.
Matt Wilson says
Hey Baker, I think everyones goal should be to become financially free–have enough passive income to support you and then be able to do what you love all day everyday.
I enjoy starting businesses, action sports, traveling–a ton of stuff–when I die I want to say this is what I spent my time doing. I look to make these things into businesses that support my lifestyle. I’m not so concerned with retirement if I’m doing what I love. Plus if I build passive income then who cares if these passion projects fail.
Since logging in to read the Manifesto… I’ve been thinking a lot about this ‘template’ in life. It’s timely for me, because I’ve started my own business (which is exciting, scary, rewarding, and risky), but have had opportunities to have a ‘secure’ job working for someone else (which is attractive for that very reason – security). I’ve chosen to direct all my energy into my own company, to not let this opportunity pass. A lot of what I’ve read here today equates the ‘untemplater’ lifestyle with working for yourself. Or maybe not ‘working’ – because it’s not work if you do what you love, right?
What seems to be generational is the ‘career’ vs ‘job’ idea. My parents were in it for the long haul… the goal was to build a career with a company, with retirement as a reward for a (very long) job well done. My generation (not sure what generation I belong to – think I’m a Gen X-er) started to think about having satisfying jobs – loyalty to a single employer wasn’t important anymore… so a lot of my peers change employers every 2-3 years. Even so, retirement is still a carrot – although they are aiming to get there in their 40’s rather than 60’s. Which brings me back to my last sentence, first paragraph: If you’re doing what you love, it may be something that you wouldn’t want to ‘retire’ from… Perhaps we’ve come full circle, for traditional ‘retirement’ of my parents generation may just be ‘untemplating’ much later in life.
Looks like a good venture you have here… good luck to you!
RJ Weiss says
First, big fan of the site. Lot’s of great material on launch day.
Excellent post Baker. When I get rid of the concept of retirement, a lot ideas new exciting ideas popped into my head. Yes, I still save money but it’s not because I want to retire as early as possible because I hate what I do.
Looking forward to more.
I love it. I’m not against saving money, of course. But, exactly as you pointed out. Not because I’m running from something I hate! Hehe.
I enjoyed this post and agree with the sentiment that if you’re doing something you love, why would you retire from it? I know a number of older people who volunteer simply because they built their pre-retirement lives around helping others.
Hey Baker – I love the new website, man! What a great collection of bloggers, and a perfect array of topics. They’re all something us Gen Y’ers (at least those of us who frequent these blogs) seem to have in common — work less, love life more, run our business, be minimalistic, and be better people.
You asked for suggestions at MvD, but comments were closed, so the only thing I’d like to see is a byline at the top of articles, so I know who wrote it before I get to the bottom. It helps with identifying a person’s tone, etc. Maybe that’s just the newspaper editor in me though!
Cheers on the new site, Baker. Hope New Zealand is going awesome.
Thanks for the support, Buck!
It’s a great idea to even have a small bio at the very beginning, so everyone knows. We’ll bring this up soon!
Thanks for the suggestion! I didn’t realize the bylines had disappeared from the individual posts (they’re on the main page). I’ve fixed that.
Wojciech Kulicki says
Awesome topic, and it’s something that I’ve been thinking about for a few years, even though I was early to start retirement savings (before my 18th birthday).
With the opportunities to build passive streams (that continue through retirement) and working from home in perpetuity, the only reason I see for retirement savings is really covering health care expenses.
It’s sad, but as you point out, many people see retirement as the “escape” from the working world. Ahh, we’re finally “done” working. People–what have you been doing for 40 years, if it wasn’t making you HAPPY?
I like how you bring up health costs. Rather than focus on retirement per se, I think most people would benefit from exploring/making sure they are fully insured.
I’m no expert, but it seems like I hear many stories of people having far less than stellar insurance, especially on things like long-term disabilities. This kind of thing can destroy years of ‘retirement’ savings within a few weeks. It’s much more a priority to me than a hefty nest egg. 🙂
Matt Jabs says
Great topic Baker… for a long time I have thought that American’s have an utterly perverted view of ‘end of life’. Retiring? Why would you want to retire if you are working in your passion and calling? The answer is simple… you wouldn’t (unless you were somehow unable.)
My plan is to develop my life’s work/ministry and transition to that full time as I eliminate debt and build alternate income. My income will come from Internet entrepreneurship endeavors, and my ministry will be done without pay… basically like Paul in the New Testament.
I just see it as plain wrong to expect a group of church goers to pay me to minister to them… so I am doing it a different way – earn my money in my passion and minister to people every chance I get… for free.
Retirement? sheh… whatever…
Haha, thanks buddy.
Scott Jones says
I believe retirement in this economy as well as this new age that we are entering into is just one new step into the working world. Even though people are retiring at 50 and 55 they have to end up back at work or doing some side business in order to manage the lifestyle that they have created for themselves. This is however creating a gap because when I was 15 I could go find a job at a supermarket or other job that the older generations would not do. Now they are occupying jobs so our younger Gen-Y’s have no opportunities to gain useful job experience. On the other hand it could be a good thing because it pushes them to find other means of income on their own such as writing a blog or finding some outlet that they can tap in to. Either way things are changing and we have to adapt financially and technology wise or we will be passed up. Great article I really like what you guys are doing on the site.
Exactly, Scott. It’s about adapting. And hopefully, Courtney and I are investing in skills/experiences that make us more equipped to do just that. I can’t say for sure, though!
Valerie M says
It’s an immense relief for me to be reading this. Retirement kinda makes sense sometimes, when you look at it as ‘insurance,’ but it loses its purpose if you’re robbing today for the promise of tomorrow. The planning for retirement isn’t necessarily the problem… it’s how people do it… and they do it blindly.
I realize people who heavily promote retirement are thinking from experiences with a different economic & financial environment. However I don’t think they are right or wrong about it. It’s easy to think they are dinosaurs in their thought processes, but Gen Y is still young… so you never know. I also think think that this attitude shouldn’t and isn’t limited to any generation. It really is a case-by-case basis. I think deep down most of us plan for some kind of retirement, or even mini-retirements if you will. This transcends Gen X, Y, or whatever. Even if you enjoy the work you do.
I hear ya! There’s no way to know what 40 years is going to be like. I may think I don’t want to ‘retire’ and come to find out I was being silly!
But that’s one reason we are interested in investing in ourselves. It’s a fine line, and I think it’s going to shift a bunch over the next several years. Chasing it… and talking about it, doesn’t seem to ever hurt. Each time I revisit it a get a little more familiar with the concept. 🙂
When I think about the money I, as a 25yo, am dumping into my 401K I get a little huffy. I could really use that money now (Sallie Mae demands to be fed) and chances are good I’m not going to be retiring anyway. I don’t think I’m the only person in this situation, either.
On the other hand, regardless of whether I am going to retire at 65 or 85, contributing to a retirement fund (or a savings account, or whatever squirreling-away-money-for-a-rainy-day fund you have) is psychologically important. It means that, although I’m drowning in student loans, I have faith that one day I’m gong to come out on the other side.
Truthfully, I don’t know that, even given the opportunity, I’ll ever stop working. It’s not that I’m not lazy (I am), or that I’m a super-productive person (meh). It’s just that a life of leisure does not appeal to me. I like to think I’m typical of our generation, but on the other hand, maybe I’m not and that’s why Untemplater now exists 🙂
Kate, you identify the dilemma perfectly.
On one hand, you *are* setting yourself up well and practicing good habits. For me, it just comes down to whether or not you can be controlled if you *don’t* stash it away.
For example, Courtney and I certainly aren’t perfect in this manner. We need to make even our savings VERY specific or we tend to find creative ways to spend them (usually plane tickets) ;-). If you can aggressively apply the portion to say student loan debt or some other tangibly and worthy goal (whatever that is for you)… well, for now we like that concept.
Once we ‘settle down’, slow our exploring of business and travel, I’m sure we will enter a ‘squirrel’ mode, too. Right now our upside on these other prusuits (monetarily and otherwise) *seems* higher.
We’ll see! 🙂
Dave - LifeExcursion says
I don’t think retirement, as you stated, means the same as it did 10-20-30 years ago. Life and business are much more global and our professional lives are more our own instead of part of a company or industry.
I think developing our own identities and brands will lead to more people accepting retirement not having one specific identity, but rather many meanings.
Great point, Dave!
I guess rather than retirement being an option or not, we should be talking about how the very definition of it is shifting!