The word “retirement” means to withdraw, to retreat from battle. But very few people view their post-career life as such. In fact, for some, it’s more of a beginning than an ending.
The world has changed more in the last century than it has in all of human time. Communication has evolved from telegrams to telephones to text messaging. One hundred years ago, movies were silent and colorless, and now they are in full-color and we can watch them on our phones.
Just like the rest of the world, retirement, too, is evolving before our eyes. Due to a number of factors that we’ll discuss in this article, it’s become necessary to rethink and redefine what retirement means. And maybe even come up with a new word for it. But, that’s an article for another day.
How “retirement” began is crucial to understanding it today.
A Brief History of Retirement
Retirement is a relatively new concept. Before the late 19th century, people used to work until they died. It wasn’t until 1875 when American Express established the first corporate pension plan that retirement was even a consideration for people— let alone an idea present in the modern zeitgeist. To qualify for AE’s pension plan, you had to have worked for the company for at least 20 years and be over 60. The idea was to create incentives for older workers to transition out of the workforce. Following American Express’s lead, other companies began establishing similar programs.
In 1935, President Franklin D. Roosevelt signed The Social Security Act as a response to the Great Depression with the expectation that it would protect older citizens from poverty. Up until then, financial security in retirement was only a reality for individuals who worked for companies with a pension program. The Social Security Act made retirement available to a broader group of Americans.
Phasing Out? Think Again.
Retirement was an idea constructed to phase older generations out of the workforce and to prevent poverty. But retirees today are healthier and still continue to contribute to society once retired. So the idea of “phasing out” no longer fits.
The lives of older generations are very different today than they were 100 years ago—starting with how long we are alive.
Increased Life Expectancy
It’s common knowledge that humans are living a lot longer than we used to. The life expectancy of our species has almost doubled in the last century. In 1918, life expectancy in the United States was 47.2 years; in 2019, it was 78.9 years. To add additional perspective, life expectancy in Ancient Rome (753 BC–476 AD) was 25-30 years. During the 2000 year period separating Ancient Rome from the US in 1918, life expectancy only increased by about 17 years. In the last century, it’s increased by 31 years. Let that one sink in for a minute.
There are a lot of implications that come with people living longer. Generally speaking, it’s seen as a great thing. It’s a sign of progress and sustained improvements in health for our species. It comes with other indirect benefits, such as a decline in global inequality and the eradication of certain diseases.
But on a personal level, it simply means more time. More time with loved ones, more time to indulge in your hobbies, and more time to fulfill your life’s purpose and work. The extended lifespan offers us more opportunities than ever before. And naturally, it means a longer retirement.
Life Expectancy
Source: Peterson KFF Health System Tracker
Of course, there’s always a caveat: just like our life expectancy, retirement has also changed over the last few decades. Generations who are now preparing to retire or are already retired are facing different challenges than their predecessors—some of which are a direct result of an increased life expectancy.
A longer life means you need bigger savings. If you plan on retiring at the average age (62) and live until you are 80 years old, you’ll need to have enough money saved for around two decades of post-career life. That would be all well and fine, but over the last 30 years, certain retirement practices have shifted, and other issues (which we explore below) have emerged that add difficulty to people being able to save enough for this period of life.
First and foremost: traditional pensions are out, and 401k’s are in. This is a trend that has been increasing since the 1980s. Today only about 17% of private-sector employees are offered a pension. Further, given the shift to a gig-economy, many workers don’t even have access to a 401k. The result is that the pressure to save enough money for retirement is now on employees, rather than employers.
Source: Peterson KFF Health System Tracker
Adding fuel to the fire is increased healthcare costs, which directly affect people of retirement age more than other demographics. The older you get, the more susceptible you are to health issues, and the more expensive living becomes.
Further, if you consider inflation and housing costs, it becomes incredibly apparent that we need to rethink how we retire.
A Need to Innovate
Now, all that can sound pretty scary. As a species, we’ve somehow managed to increase our most valued asset (time), but in doing so, we have created corresponding complications that initially may seem unsolvable. However, there’s one incredible silver lining to all of this: We can solve these problems. We are a complicated species that seemingly creates more problems for ourselves, but we also have the ability to create perfect solutions. There are brands and companies who are actively working to change the game in retirement so that our additional years spent alive are full of life.
Here are a few of the best solutions to the new problems facing retirees today.
❓The Problem: Changing Retirement Landscape
💡The Solution: Get Savvier With Your Planning
With the decline in pensions, retirees have to get savvier in their financial planning for retirement. As discussed in our interview with Financial Literacy Educator, Vickie Elisa, the classic three-legged stool strategy for retirement planning no longer cuts it. We recommend a five-legged stool strategy that includes 401k/pensions, personal savings, social security, investments, and home equity for a secure retirement.
❓The Problem: Not Enough Retirement Savings
💡The Solution: Keep Making Money
Some consider retirement as an opportunity to continue earning an income, but just in a different way than they did before. This doesn’t necessarily mean working a full-time job; it can mean turning a hobby into an income or starting your own business. Companies like Guru, Fiverr, and Upwork make it easy for retirees to earn money as freelancers or consultants.
❓The Problem: Rising Housing Costs
💡The Solution: Get A Roommate
Roommates aren’t just for college students anymore. For many, renting out a room or a space in your house is a great way to counter rising housing costs in retirement. The company Silvernest has created a safe and innovative tool for finding the right roommate. It pairs aging homeowners with qualified housemates using a compatibility matching tool and background checks that ensure the homeowner is paired with the right fit.
❓The Problem: Rising Health Care Costs
💡The Solution: Stay Healthy Longer
One solution that retirees are using today to curb potential health care costs may seem surprisingly simple: they are trying to stay healthy for as long as they can. This includes their physical, mental, and emotional health. Retirees are keeping physically fit through fitness activities like yoga, which has amazing benefits such as lowering the risk of cardiovascular disease, improving sleep quality, and preventing falls.
There are also some pretty smart products emerging to make managing your health as you age easier. For example, Tellus is an emerging product in eldercare that measures your health data in real-time from up to 6 meters away. It’s a small device that sits on the wall and, from that distance, measures your heart rate, breathing rate, your sleep and can even detect if you fall.
For emotional care, Join Papa offers a service that solves loneliness elders can experience. It pairs older adults and families with “Papa Pals” for companionship and assistance with everyday tasks.
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If we view the transition into retirement as a beginning rather than an ending, we can plan differently and be better prepared for potential challenges that emerge. This simple reframe will make all the difference in creating systems for success now and for the future as retirement continues to evolve.
This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.
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