5/19/2016 – Let’s Shrink Retirement

Retirement is too long. We haven’t adjusted to longer lifespans and greater physical and mental capabilities in our later years. As a result, the notion of retiring at 65 is outmoded for most—and even dangerous for many, who can’t possibly save enough over their working lives to cover a 30+-year retirement.

I ask people all the time, “If you had thirty extra years in your life, where would you put them?” No one ever says, “I’d make old age longer.”

Yet this is precisely what we have done. Life expectancy nearly doubled in the 20th century and without giving it a second thought, we collectively tacked on all the added years to the end. Only retirement got longer.

Instead of thinking imaginatively about the implications of lives twice as long as our ancestors, we wring our hands about the millions of people who will be unprepared for decades-long retirements and worry about how governments can afford to support populations top-heavy with old people. The idea that we should buckle down and save for 30 to 40 year retirements is utterly misguided. For one, it’s probably impossible for the vast majority of Americans.

Many Workers are unable to finance 20+ year retirements


Second, extremely long retirements aren’t good for individuals or societies.

The key obstacle standing in the way of creatively redesigning life is that we humans are creatures of culture, and life expectancy increased so fast that culture hasn’t had a chance to catch up. A decade-and-a-half into the 21st century, our lives are still guided by the same norms and social scripts that guided our parents and grandparents. It once made sense to get all your education early in life, work hard while you find a mate and rear your children. It made sense to retire at 65 in 1933 when Social Security was put in place. If you were lucky enough to survive to 65 (most people didn’t) getting a few years off at the end of life made sense.

But these norms no longer make sense for lives doubled in length—and in which good health lasts much further into people’s later years.

Every fundamental aspect of life will change—the nature of family, education, politics, financial planning—and none more so than work.

In coming years, people need to—and many will want to—work longer, a lot longer. The good news is that working longer promises scores of benefits for individuals and societies. Engaging in productive activities outside of the home is associated with cognitive, social and physical benefits in addition to the more obvious financial benefits.

Work improves cognitive functioning


With innovative financial products, we can work differently, alternating between working full and part-time. Education should not stop in our early 20s and we should save for intermittent returns to universities, pursuit of nanodegrees, and incentivize more employer-based training that includes seasoned workers, as well as incentivize HR benefits from employers that fund fellowship/retraining years.

We can work many more years yet fewer days per week. We will no longer have to face raising our children at the very same time we reach the peak of our careers; rather we can cycle in and out of full and part-time work, allowing parents of young children to finally achieve that elusive concept of work-life balance.

Workforces are growing more age diverse than ever before in history and the glimmers from research on mixed-aged work teams looks like they outperform all-young and all-old teams. Matching the speed and flexibility of youth with the experience and stability of the old will make work more enjoyable and more profitable in the age of longevity.

As soon as we wake up and realize that longer lives afford us the unprecedented chance to redesign all of life, we can begin to write a life script for lives that last a century. One thing for sure, it won’t be a story about old age, it will be a story about long life.

Source: BlackRock Retirement Institute