Retirement is a fairly new concept. The Social Security Administration was created only 83 years ago in 1935. The first pension in the US was started by American Express in 1875, but the pension system that we know today didn’t take off until after World War II. Prior to modern day retirement, people worked until they either died or were mentally or physically unfit.
I grew up thinking people retired at 65 and moved to Florida to relax until they croaked. They lived off their Social Security and their pensions, and enjoyed the Vitamin D and early bird dinners as portrayed in Seinfeld.
Today in 2018, retirement as we previously understood it is changing. Retirement is taking many different forms. Traditional pension plans (defined benefit plans) are a thing of the past as they have become too costly for employers. This may be due to the steadily increasing longevity of American lifespans. In place of the traditional pension plan are employee directed retirement savings schemes that include the 401k, IRA, 403b, 459, etc.
The life expectancy of Americans in 1950 was about 68 years. Today, it’s pushing 80. Historically, retirement didn’t last long for folks so there was not much planning that needed to be done. You retired at 65, and your pension and social security carried you to 68 when you passed. Easy.
Now today with Americans living to 80 and beyond, it’s a much more complex topic. Much more planning is required. A “traditional” retirement is now 15 years, and non-traditional retirements may last 40 years and beyond.
How “Retired” is Defined
Lately, there has been media coverage of people who are calling themselves retired and are in their 30’s and 40’s, and many people in the public are taking offense to it. If you have enough investments to retire early, then great! The problem is these folks continue to do things to earn money and some people think to themselves – “if they still work, they can’t be retired!”
As previously stated, traditional retirement historically did not last long. If you worked until 65 and died at 68, you had no problem spending three years at the beach. Now, folks are retiring earlier than 65 due to careful planning and are living much longer. Retirements today can last over 40 years!
Living at the beach for three years is one thing, but 40 years might get a little old. I’ve worked for an employer that actually has a forced retirement at age 62. Many of these folks are still as mentally sharp as they ever were and physically in great shape. They need something to do in retirement to keep their minds and bodies active, whether that’s volunteering, consulting, starting a business, working part-time, traveling, etc. Now are these people still “retired”?
If you call yourself “retired,” that’s fine. But if you’re a blogger, and have a business built around the fact that you “retired early,” then just be transparent about the fact that your new entrepreneurial endeavors are earning you an income. People like transparency, especially in the finance world where it seems every other person is trying to mislead to earn a buck.
The problem is retirement should not have a black and white definition. The way I define “retirement” is not working a traditional job anymore because you don’t need to. Once you reach financial independence (at whatever age that may be) and decide to quit traditional employment to start a business or volunteer or give speeches for money? Good for you. I hope that’s the retirement you always dreamed of.