Forget About a Comfortable Retirement – Not Probable

  • Baby boomers don’t save enough,
  • Retirees will run out of money
  • People will need to work until age 75
  • Companies are eliminating pension plans

The above and other such warnings accrue from failure to see the big picture of what retirement is really about.

Retirement Big Picture Issue #1

The idea of retirement is a temporal anomaly of the 20th century. Before the industrial age, let’s call it 1900, people did not retire.  They worked until they died. There was no such thing as a retirement plan at work, an IRA or 401k. The notion of retirement is BRAND NEW in human history. From the dawn of humanity (estimated at 200,000 years ago) until maybe 1930, there was no such thing as “retirement.” It may very well be that the time when retirement was possible, during an extreme age of abundance, is to be no more. The ability to have sufficient excess during one’s working years to support oneself for many years while not working is a remarkable idea.  It’s an idea that people have come to expect but an idea that requires extremely unlikely mathematics. One must have enormous excess to store away sufficient resources during 45 working years to support oneself for another 30 years – a ratio of working years to idle years of 3 to 2.

Note that biology did not plan for that.  Squirrels store sufficient resources during the warmer months to have enough for the coming winter.  They then must go back to work at the thaw. They don’t get to kick back upon reaching 65% of their life expectancy.  No vacations either.

Not even the architects of Social Security imaged what we call retirement.  When Social Security cleared the Supreme Court in 1937, one could begin taking benefits at age 65.  But the average life expectancy was 67. So there was never any notion that retirement would be a multi-decade vacation from work. The idea was to receive a subsidy for a few years to supplement ones savings and that would do it.  Work for 45 years and have a retirement say of 5 years – a ratio of 9 to 1.

So when I read comments about the difficulty of retirement we all face, I think, “of course it’s difficult, it’s not mathematically probable!” There were a few decades that have allowed for us to form this perverted  notion called”retirement” and as that golden age passes, millions are up in arms because they don’t see this big picture.  My message to baby boomers and those younger – don’t expect to retire as that’s an idea from the last century.

Retirement Big Picture Issue #2

In the book “The Last Hours of Ancient Sunlight,” Thom Hartmann juxtaposes the time it took for fossil fuels to form (millions of years of decomposing plant and animal matter) that we will use up in 400 years (from 1800 to say 2200). In other words, it took a very long time to build up the energy nest egg and relative seconds to consume it.  The answer of course is not to rely on the nest egg but to use renewable sources of energy – those sources that are being produced continuously.

I think this is a good analogy for retirement.  The amount that can be accumulated in 45 years of work, for most people, will be used up in a few short years of non-work.  The answer is renewable sources of income that come from current (rather than past) productivity.  The sources include:

  • Investments in a business (whether as a shareholder or an operator) – as the business earns income each year, that income can be distributed as dividends
  • Ownership of Real Estate – rents that exceed expenses can be distributed for retirement living expenses
  • Physical Labor as long as one is able
  • Mental Labor (consulting, tutoring, teaching, selling)
  • Creation of intellectual property (writing, inventions, software, art)

The above can produce income from new dollars through each year of retirement.

To do what people have expected to do in retirement won’t work.  Too many expect to place their meager resources in bonds and bank accounts (similar to ancient sunlight, these are old dollars saved in the past) and combined with other sources over which they have no control (pensions and Social Security, if any), eke out the last century’s view of a retirement. The sooner more people can understand the big picture, the quicker they can start appropriate action for thriving in the last third of their lives.

  • David Bressler

    I agree.

    Interestingly, I read a book about the invention of the diving bell (Descent, by Brad Marsten). In it, there was a picture of what it meant to be wealthy that I found relevant. Rich people didn’t stop working, they worked differently. They might take 6 months to lecture in Europe, and then a few months planning their next activity. It was a different time, but I think it relates to how we should view retirement ourselves.

    Unfortunately, what you’re saying is something people don’t want to hear. Therefore, though it’s obvious to people like ourselves, they’ll just ignore what’s right in front of them and keep living the “dream” of past generations, where retirement was the end of work.

    I hope we see some policy changes that align with how you’re envisioning retirement, so that it makes it easier for people to save for long-term life stages.


    • bobrichards

      Ken Dychtwald, Ph.D., President and CEO of Age Wave (and author of the book by the same title) predicts that the new retirement will look more like you state with people ending one career say at age 40, going back to school followed by another career, etc. However, this strikes my as only possible for 20% of the population who are true knowledge workers, people who are self-learners. I don’t see how an auto-mechanic or worse, someone with no skill at all can do that. There are more and more people that are not keeping up with skills needed to participate in the economy. Check this out and my point becomes clear

  • David Bressler

    Wow Bob! Those stats are incredibly shocking.

    I like to refer to the new career as a “career portfolio” instead of a “career path”. People need to “collect experiences” and out of the total of their experiences, create a differentiating “value” that they bring to the projects they’ll work on.

    For example, I’ve been in technology my whole career, but believe my core value is an ability to explain complex ideas simply, and in a way that is meaningful to the audience I’m speaking with. Anything I do from now on in my career will be designed to leverage and enhance that core value of mine.


  • Pingback: Who Says You Deserve to Retire? | The Retirement Blog()