To hear some people tell it, retirement is one of the basic necessities of life – right up there with air, water and food. Closer to the truth however is that retirement may no longer be necessary. If you have been fretting over your prospects for retiring – or more precisely, for not being able to retire – you may want to seriously rethink that concern.
The human race survived without retirement for the vast majority of its history. In the US, Social Security only came into existence in 1935, and the first retirement checks didn’t begin going out until 1940. It wasn’t until the 1950s and 1960s that retirement started to become a fixture in middle-class America.
But a lot has changed since Social Security began, and retirement may no longer be necessary, or at least not as necessary as it once was. Here’s why…
Shift from physical labor to white collar jobs
When the concept of Social Security was hatched in the 1930s, middle-class America was heavily involved in physical labor. Farming, mining, and factory work dominated the labor scene. It was easy to see why retirement was coming to be viewed as a necessity. Under intense and prolonged physical labor, the body begins to wear out, and the ability to earn a living itself is threatened. Retirement was seen as an antidote to this problem.
Today however the vast majority of the American workforce is involved in white-collar work, or at least jobs that involve no more than minimal physical exertion. Far fewer people today are retiring out of physical necessity. That certainly reduces the need to retire at all.
The downshifting of the overall job market, particularly the disappearance of full-time, living wage, fully benefited jobs, is forcing more people into self-employment. If you’re self-employed, you have both less reason and less motivation to retire at all. Retirement for the self-employed is something like quitting on yourself. In addition, the rise self-employment virtually eliminates anything that looks like a mandatory retirement age.
Computers and the Internet
The growth in the use of both computers and the Internet has not only helped to move the labor force away from physical labor, but it is also been a boon to self-employment. Working on a computer is very different physically from chopping wood, hauling bags of cement, and even sidewalk sweeping. It involves very little physical exertion at all, and doesn’t tax the body into exhaustion. You can work on computers right up until the end of your life.
Work at home
This is another area where computers and the Internet have had a major impact. More people than ever are able to work from home, particularly the self-employed. This is also a major stress reducer, since it eliminates the daily commute and all that is involved in it.
Retirement becomes far less necessary if you don’t even need to leave your home in order to earn a living.
We can cite government statistics showing how the economy has been growing the past few years, but few would doubt that the economy is less certain now than it is ever been in any time since World War II.
Retirement requires a large measure of economic stability, even if you are not relying on the job market. You need stable retirement income sources, predictable investment returns, and low-inflation in order to make retirement a comfortable reality.
But that’s not the world we have today. Employment represents something of a shock absorber in dealing with economic uncertainty. This is particularly true when you have it in combination with a decent sized investment portfolio in at least some predictable retirement income like Social Security.
The income earned from continued employment (or self-employment) could be a major stabilizing factor in the predictable event that the economy takes another nosedive. Once you stop working, the employment option goes away, particularly if you’re out of the workforce for more than a couple of years.
Longer life spans
At the time Social Security was created, the average lifespan in the US was 63 years. That had at least something to do with why the official retirement age was set at 65. Statistically at least, the average person would not live long enough to collect benefits.
That situation has changed dramatically today. The average lifespan today is about 79, which is to say that the average person who retires at age 65 will collect benefits for 14 years. And once a person reaches age 65, there is a better than even chance that he or she will live into their 80s. This is also why the Social Security system is considered to be fiscally unsound.
The point is, retirement is no longer about covering the last few years of your life. You may need to cover 20 years or more. For most people, it is extremely unlikely that they will be able to do that out of their investment portfolios. Many elderly today, even those who saved and invested a significant amount of money over the years, are only able to survive by drawing down their investment principal.
This is especially true since the retirement years force a greater reliance on fixed income type investments, which are currently paying close to nothing in interest. The prospect of draining your retirement portfolio to zero is a real possibility, especially if you live much past 80.
Semi-Retirement is more doable than ever
The best way to avoid that fate is to continue working into the traditional retirement years for as long as you can. The more that you rely on earned income, the less you’ll need to withdraw prematurely from your retirement portfolio. That will preserve the money for when you reach very old age and are no longer able to work at all.
That doesn’t mean that you have to continue working full-time until the day you die. But you can run some form of part-time business that will enable you to enjoy a comfortable semi-retirement. If you can rely on your business income, plus any retirement income, like Social Security, you can avoid tapping your financial resources until you reach at least 70, or even 75 and maybe 80.
Given how common the use of computers and the Internet are in business today, a self-employed semi retirement is now more doable than it ever has been before.
Have you considered the possibility that full-time retirement is neither doable nor even necessary?