When can I retire? Setting a retirement date has become a daunting task. The Great Recession of 2008 has had a dramatic impact on many retirement plans. Some retirees have been forced to re-enter the workforce in order to survive. Retirement planning is now fraught with uncertainty. Perhaps the real question has become, “Should I retire?”
The Age of Retirement
Aging and increased longevity has transformed the nature of retirement. A century ago the biggest risk to retirement was dying too young. Today the biggest risk to retirement is living too long.
The increase in average lifespan during the 20th century is a remarkable achievement. By 2050 it is expected that 1.5 billion people, or 16% of the world’s population, will be age 65 or older. The aging of the population is historically unprecedented and will be the source of profound social and cultural change.
For people born in 1900, a retirement age of 65 was fifteen years beyond their average life expectancy. In other words, the average length of retirement would have been -15 years. Today, the average length of retirement is 16 years (using age 65 as retirement age and age 81 as the average life expectancy). The average duration of retirement has increased by 31 years since 1900.
The starting age for retirement has consistently remained around age 65. In other words, even though human longevity has increased dramatically since 1900, our assumption about the age of retirement has not changed.
The traditional view of retirement means a withdrawal from work as well as the income associated with it. Funding 16 years of retirement without generating an income has become one of the most significant financial challenges of our time. If we happen to live to age 90, then we are funding 25 years of retirement. This is an extraordinary challenge, even with supplemental income from government plans.
When Can I Retire? Later
The story of modern survival is intimately connected to money.
One practical purpose of employment is to accumulate money in the form of retirement savings. Failure to save enough money means we must continue to work past age 65. As we will see below, the employment rate of older workers is increasing. As the baby boomers retire over the next twenty years, many will continue to work in some manner.
Market volatility can affect our savings. If our retirement savings are reduced by market volatility, then we must, “unretire” and begin work again. Publically funded plans have also suffered. The Great Recession of 2008 has permanently altered the retirement plans of many people.
Delayed retirement: A new trend? provides some interesting statistics:
- The workforce is aging. In 2010, 1 in 6 workers in Canada were over the age of 55;
- In 2010, the average age for retirement in Canada is age 62;
- In 1991, the ratio of young worker (25 to 34) to those nearing retirement (55 and over) was 3.1; in 2010, it was 1.3;
- From 1997 to 2010, the employment rate of men 55 and over grew from 30.5% to 39.4%, and that of women grew from 15.8% to 28.6%;
- The employment rate for men age 65 to 69 almost doubled between 2000 and 2010;
- The trend toward delayed retirement originated in the mid-1990s, and is not directly correlated with the financial crisis of 2008;
- Increased longevity is a primary factor.
A delayed retirement is a necessary but reactive response; it is not a solution to the new and emerging challenges ahead of us.
When Can I Retire? Gradually
The idea of phased retirement originated in Sweden in the 1970s as a work-life balance strategy for older workers. In Canada, 48% of workers intend to implement a phased retirement strategy.
A phased retirement is a formal agreement with an employer to transition from fulltime to part-time employment immediately before retirement. For employers it represents an important strategy for retaining expertise within senior employees.
He now coaches a swim team with his wife and volunteers harvesting grapes at a local winery. He relishes still being called upon to help with projects, but also enjoys being able to turn them down if he’s not interested, an option not afforded during his 52 years of full-time work.
“Now I work on my schedule,” he said. “Not the company’s.”
A phased retirement allows the individual to ease into retirement by gradually reducing their working hours. In general, it refers to an arrangement with an existing employer to continue working in a reduced capacity. The actual work schedule is flexible and mutually agreed upon between the employer and employee.
A Working Retirement
The most important task ahead of us is to reinvent the meaning of retirement. Many of the assumptions we have about retirement are simply no longer relevant or sustainable. One reason for this is the new financial reality we find ourselves in. However, perhaps it is even more important to view retirement not as a withdrawal, but as a threshold into a creative and imaginative phase of life.
Finding ways of extending employment later into life is not enough. Many people are unhappy in their work. A 2013 Gallup report called State of the Global Workplace revealed that unhappy workers outnumber happy workers two to one worldwide. (A good summary of the report can be found at Positive Sharing)
No one wants to spend the final quarter of their life trapped in unfulfilling work. Retirement is a period of time in which we should strive to find great work. As we improvise new approaches to retirement over the next twenty years or more, new forms of entrepreneurship and solopreneurship will emerge.
Retiring into Our Work
Work does not end with retirement. However, the nature of our work changes.
The financial risk of outliving our personal savings is a critical issue that must be addressed. However, it is also possible to have enough money in retirement, while feeling unwanted, undervalued, and isolated from the world. Retirement is a creative shift in our life course, not merely a cessation of work.
It is time to redefine our relationship with work, “What are the creative possibilities for achieving great work?” This new and emerging relationship with work has already become a practical necessity for baby boomers.
In order to continually re-imagine ourselves through our work lives, we must have a part of us that belongs to something beyond the status quo. Something over the horizon or, paradoxically, beneath us, in the ground of our life. Something as yet hidden, yet to be brought to light. Something which is governed by other laws than the ones we so assiduously obey every day. Something to do with the laws that govern the way we belong to this stubborn and beautiful world.
The underlying ground of the new retirement is a new relationship with work. Over the next twenty years it is important for us to become imaginative and reinvent ourselves by integrating vibrant and inspiring forms of work into the fabric of retirement.
But not work merely as a means to supplement income. Work as a means to engage with and belong to the world around us.
The question is not, “When can I retire?” The real question is, “What am I retiring into?”