This past spring Hunt Scanlon Media reported the results of a recent CareerBuilder survey on retirement. It indicated a full 53% of workers 60 and older are postponing retirement. What?s more, 40% don?t think they?ll be able to retire until age 70 or older.
What does that say about the current state of retirement?
I think it speaks to the new reality of retirement in the 21st century. It?s not as certain as it once was, and it?s becoming beyond the reach of many middle-class workers.
This is a topic I?ve been writing about for the past several years, as well as various strategies to work around it. It seems the predominant official reaction is denial, as well as the perpetual admonition for everyone to save more for retirement. That puts the ?blame? squarely on workers, and ignores certain fundamental realities.
Why People are Postponing Retirement
We probably don?t need to dig too deep here, but here are some of the more likely causes:
The disappearance of traditional defined benefit pension plans. Very few people are covered by traditional pension plans anymore. The Social Security Administration has reported a decline in traditional pensions from 38% of workers in 1980, to 20% by 2008. We can presume that number is even lower in 2018. It removes a critical support leg from the retirement picture of middle-class workers in particular.
Employment instability. From World War II until the 1970s, most workers could reliably expect lifetime employment. Today a typical job last only a few years, and some are measured only in months. Even if you?re a committed saver, it?s very difficult to amass a large retirement savings portfolio when you?re changing jobs and income levels every few years.
The continuing hangover from the Financial Meltdown. Millions of people experienced job losses, career failures, bankruptcies and foreclosures in the crisis. Some recovered, some didn?t. Even among those who did, many found themselves permanently impaired. For example, a $60,000 job was replaced by a $40,000 job. They may not be counted as unemployed, but they?re definitely in a weakened state.
The cost of living is rising faster than incomes. I think most of us are aware the real rate of inflation is considerably higher than the bogus CPI. If they report inflation at 2% ? which is the basis of increases in salaries and Social Security ? but the real rate is 4%, you fall behind by 2% each year. Over 10 years, this results in a decline in your standard of living of more than 20% in real terms. This explains why the majority of Americans are now living paycheck to paycheck.
Less Obvious Reasons for Postponing Retirement
Those are the more obvious reasons for postponing retirement that most people are aware of. But there are a few that might be flying under the radar.
I think one is the fear factor. Life, employment, and finances seemed more stable between World War II and 1999. But since 2000, we?ve had two serious stock market crashes and two deep sessions. That?s too much negative activity in less than two decades. People correctly interpret the ominous implications it has for the future ? despite the official denials.
There?s also the unspoken threat of the collapse of both Medicare and Social Security . Both problems are officially ignored by the powers that be. But for the average non-wealthy American, this is a source of deep concern. Due to the rolling crisis with healthcare, concerns about the stability of Medicare maybe even greater than those for Social Security.
Longevity plays yet another role in postponing retirement. If you expect to live into your 90s, there are serious risks involved in retiring in your 60s. Previous generations retired with the unspoken assumption that they?d live only another 10 or 15 years. But if you live as long as 30 years beyond, retirement has serious risks. We just have to look at the last 20 years to imagine the implications.
Even if you have a large amount of retirement savings, it?s easy enough to imagine outliving it if you?re going to live in your 90s.
More Pleasant Reasons for Postponing Retirement
So far we?ve been discussing dark reasons for postponing retirement. But there are other reasons that may be much more positive in tone.
I?ve long maintained that retirement may no longer be necessary for a lot of people, maybe even the majority. Now it would be better to be able to retire, and choose not to ? rather than not being able to retire at all. But there are compelling reasons why millions don?t need to retire, certainly not in their 60s. Some may even be able to work well into their 70s. And if they can, there?s absolutely nothing wrong with that.
When the concept of retirement was being formulated in the middle of the last century, it was based on a labor force primarily engaged in physically stressful occupations. That can include farmers, laborers, factory workers, and the construction trades. Retirement from those occupations made abundant sense. The body wears down with age. By the time you reach your 60s you?re often physically unable to continue.
That?s hardly the case today. Most people work in white-collar or service occupations. In most cases, the physical aspects of a job are minimal. The stress is more mental than physical. But most of the work can be performed even when the body as well past its peak. The Internet revolution has made these occupations even less physically taxing.
Among this group ? which represent the majority of workers today ? the primary motivation for retirement seems to be based on expectation.
The concept of retirement was cemented in the average person?s mind as a result of the more tangible need to do so by earlier generations. We can suppose that since retirement is considered a desirable goal, it continues to be so even though it?s no longer entirely necessary.
Downshifting Rather than Retiring
The bigger retirement ?need? seems to be to escape from the stresses of the workplace. But there are other ways to reduce stress, without making a complete exit from the workforce.
There are three aspects of work that I believe escape most people, but will make many rethink the whole idea of retirement:
1. People who like what they do don?t retire. This is a pattern I?ve clearly identified over the years. In particular, the self-employed seem especially reluctant to retire. It makes sense too. If you?ve spent years building a business, it?s not just what you do ? it?s part of who you are. The self-employed are rarely anxious to sever that arrangement. That?s probably true of anyone who likes what they do. The key it seems, is to identify work you actually like to do.
2. We all need to be relevant. As I get older, this becomes increasingly important to me. I?ve heard this from others as well. The work we do isn?t just about earning a living. We don?t often think about this, but it really establishes our place in human society.
Few of us would be content to merely survive. Most of us need a purpose, which usually comes from making some sort of contribution to society. Work is a critical component of that contribution. I believe this is why many retirees are not nearly as happy as they thought they?d be. Surviving while being irrelevant strikes me as emotionally and intellectually empty.
3. Work doesn?t have to be a fixed occupation. I believe most people narrowly define work aa the specific occupation they?re currently in. But the reality is we?re each capable of several occupations. If you were to move into one of you found more agreeable, retirement wouldn?t be an absolute necessity.
Approaching Retirement with a More Balanced Strategy
The concerns driving people to postpone retirement are entirely legitimate. Though it seems like a contradiction, the state of the economy can have a significant impact even on the retired. For example, if you?re relying on income from your retirement portfolio, a stock market crash or prolonged bear market could significantly lower your investment income.
Longevity is also ? somewhat ironically ? a source of insecurity. If you retire at 65 and live another 30 years, there?s a very real possibility of outliving your money. This is especially true with interest rates near record lows. There are few mental pictures more frightening than the combination of old age and poverty.
But let?s take a more positive view of our lives. The reality is there are more non-physically taxing occupations than ever before. It may be possible to transition into one that works better for you. And if you?re on Social Security, it will probably only need to be part-time anyway.
We should also consider the technological advances that have taken place in recent years. The Internet has opened up an entire new universe of occupational opportunities. We could probably say the same of smart phones. Either can enable you to either work at home or at least work remotely.
For the growing number of people who will probably never be able to fully retire, the real goal may be to find and create more sustainable work. That may sound like the exact opposite of retirement, but maybe that?s something we need to move away from anyway. Maybe the real goal is to create a balanced life, rather than a retired one.
Marching Toward Alt Retirement
I don?t think any of this is as scary as it sounds on the surface. We seem to be marching steadily toward some form of ?alt retirement?, and that?s probably not a bad thing.
We have to recognize the reality that people are living longer. Retirement at age 62 or 65 is no longer crucial, or even desirable.
Postponing retirement will open important opportunities. One is finally moving into a career that you actually like. After a lifetime of working in something else, you may find the change refreshing and invigorating. That?s important as we get older. It will also be a crucial opportunity for people with minimal savings to get into a better financial position.
Yesterday at the gym I saw something encouraging. It was midmorning, and the majority of the scores of people working out were in their 60s and 70s. Three or four might?ve even been in their 80s. This speaks of a very different picture of ?old age?. You wouldn?t see such a thing years ago. But many older folks today are taking greater responsibility for their health.
My suspicion is that if you can work out, you can still work. And if you can simultaneously maintain better health and a continuing connection with- and relevance in-the world, it?s a win all around.
So maybe we should embrace this as a positive change. At every phase of life there are leaders ? that top 10% or 20% who are digging in and making things happen. You can consciously choose to be part of that elite group. Millions of people already are.
Are you still thinking of retirement in your 60s, or are you among the growing number of workers seriously considering postponing retirement?