The Concept of Retirement

The concept of retirement and how it has taken shape over time is quite interesting. Retirement has not always been so highly anticipated nor been looked upon so positively. Below we take a deeper look into the concept of retirement, its evolution, what it may look like in the future and suggestions on how to incorporate its positive features earlier in life.

How did we arrive at our current perspective on retirement? Let us first take a look at the historical concept of retirement.

How It Began

Roman Emperor Augustus, as early as 13 B.C., paid pensions to Roman soldiers who had served 20+ years. He financed this with taxes and a 5% inheritance tax. It was not until the late 1600’s that the concept took hold in Europe. In 1684, the first European received a pension paid by the London Port Authority to its workers, equal to half of one’s annual income.

In the 1880’s, Otto von Bismarck, the German Chancellor, proposed that people 70 years of age and older (this was soon lowered to age 65 by the German government) be provided financial support by the government. He posed that those “disabled from work by age and invalidity” should have a means to survive and that the government should provide this. The government was aware that most people did not live to the ripe old age of 65 at the time and payouts to these individuals would rarely take effect. The unintended consequence of Bismarck’s policy is that he set the age at which many governments would compensate individuals for becoming old for years to come.

Origins in America

The U.S. began paying pensions after the Civil War to disabled or impoverished Union and Confederate veterans or widows of veterans.

Farmers during the largely agrarian period in the 1700’s and early-mid 1800’s rarely wanted to quit work. The same applied to factory workers during the Industrial Revolution of the mid 1800’s. As workers aged and refused to quit working, younger individuals had difficulty getting jobs.

Then the Great Depression occurred.

During the tumultuous years of 1929-1939 many Americans lost their jobs.

The First Government Assistance Programs Are Formed

In 1935, Francis Townsend of California proposed a mandatory retirement age of 60, which would grant aging individuals a $200 per month payout (or a salary equivalent to an average middle-income wage). This would allow the younger generation an opportunity to enter into the few jobs available during this era. There were few elder assistance programs in existence at the time and the ones that did exist were poorly funded.

President Franklin D. Roosevelt responded in August of 1935 by passing the Social Security Act, requiring individuals to fund their own retirement through payroll tax deductions. This ultimately placed the responsibility of caring for the nation’s elderly population in the hands of the federal government.

In 1965, President Dwight Eisenhower passed an amendment to the Social Security Act allowing individuals aged 65 years and older the option to purchase “Medicare” medical insurance.

Current State of American “Retirement”

Social Security and Medicare remain in existence today and are essential to the financial well being of many elderly Americans.

With life expectancy rising and Baby Boomers now entering retirement age, insolvency of Social Security is a legitimate concern. Age requirements for payouts have risen from 65 to 67 with max payouts now occurring at age 70 and this progressive age increase is likely to continue.

Image source: drhurd.com

According to a recent Forbes article, based on current trends in the absence of reform, Social Security funds will be exhausted by 2034. This will leave many Americans with two basic options:

1) Continue to work until physically unable to do so

or

2) Fund retirement with personal savings

Perspective Change on Retirement

Most individuals today do not want to work forever (although there are some out there that do). Instead, most strive to work hard early in life in hopes of saving as much money as possible so that they can live comfortable and joyous lives in their later years.

This forward thinking perspective often comes at the expense of the present. The grind of the 9-5, the stress of student loan or credit card debt, the hustle and bustle of raising children, the mortgage, the car payment, the lack of savings. These factors among others, force many into a scarcity mindset with thoughts such as, “If I can just make it to 65, then I can relax. If I can just make it until the kids go to college, then I will take that trip.”

Image source: Imgur

Let us instead question the status quo. 

Why do you have to wait until age 65 to do the things you want to do?

You don’t!

Let’s take a look at how you can make this happen now.

One Possible Solution

Americans are living longer and prospects for Social Security and Medicare are gloomy, therefore Americans will likely be forced to work longer in the years to come. As Jack Nicholson says in The Shining, “All work and no play makes Jack a dull boy.”

To prevent long periods of continuous work and the many associated negative mental and physical health consequences – unhealthy stress levels, lack of sleep, emotional and physical fatigue, burnout – I propose that you take “intermittent retirement” or sabbaticals throughout your working life.

Benefits of “Intermittent Retirement”:

• Better physical and mental health to devote to enjoyable activities (particularly physically demanding activities such hiking, biking, climbing, diving that you may not be able to enjoy later in life)
• Creating space for yourself to grow, reflect and plan the trajectory of your future
• Allowing time to explore non-profession related interests that can be difficult in a busy job
• Enjoying life now in case this highly sought after retirement never transpires due to lack of benefits/funds, poor health of self or a loved one, early death, etc

You are likely thinking, “I could never do this. I have children I have to put through college, a mortgage, a job I can not leave.”

You do not have to quit your job to make this a reality. You can start taking steps today.

Here are a few ways to get started.

Implement “Intermittent Retirement” on Your Own Terms:

• Work with your current employer in negotiating time away to later return to your current position
• Time off between jobs to travel and explore interests
• Work remotely in current job or other job that allows it
• Cut back work to part time, if feasible, to create time to pursue interests
• Use vacation time in self enriching ways – travel, time with loved ones, education
• Devote free time to working toward long term goals
• Pay down debt and save aggressively to reach these goals

To be clear, I am not opposed to saving for a traditional retirement in old age. I am, however, not in favor of living a non-enjoyable life during your most productive years in hopes of reaching a prosperous older age that may never arise.

Ultimately, this life is yours and you are free to live it how you want. Tomorrow is not promised. Retirement is not guaranteed. Tomorrow’s version of retirement will likely look much different than it does today so stop wasting time. Get out there and live!