The Future of Retirement

One of the goals that almost everyone working shares is a desire to eventually stop working; there are very few people who want to keep up their jobs for the rest of their life.  (There are some exceptions, of course; Hugh Hefner being one that instantly comes to mind.)  Retirement is the endgame plan of most working people, the final goal toward which we're all working.

But, retirement itself is a relatively new concept.  As I've noted before when discussing Social Security, the modern US concept of retirement has only been around for a little over a generation.  The ‘three-legged stool' model of retirement based on Social Security, pensions, and personal savings has been around only as long as Social Security itself, less than eighty years (a long enough time that most people currently alive cannot remember a time when Social Security wasn't available, but in the grand scheme of history, barely a blip).

Ah, that's the life...the retired life

Retirement is currently changing even more.  Pensions are rapidly disappearing to be replaced with saving plans like 401(k)s, Social Security is less and less prominent in people's retirement planning (particularly among younger people), and the very idea that people should wait until sixty to enjoy retirement seems to be debated more and more.  So, the million dollar question then becomes: what does the future hold for retirement?

Current Retirement Trends

As any good futurist knows, if you're trying to figure out where something is headed, you need to look at what is happening to it now, and try to extrapolate out further in time to a logical conclusion.  So, what's happening with retirement now that will influence the concept of retirement in the future?

1) People are living longer…: There's nothing wrong with people being longer lived; being a person myself, I hope to keep on living as long as possible (and then maybe a little bit longer).  But it does mean some issues for retirement; the concept of retirement arose to allow those who were near the end of their life a few years of rest before, well, their eternal rest.  Longer lifespans have caused issues in everything from Social Security to company pensions.  While we're on the subject of people at the end of life…

2)…And they're healthier and more active, too: Again, I'm not saying that it's a bad thing that most people aren't working 12 hour shifts, six days a week, doing backbreaking labor anymore (at least, in the Western world).  But, it's leading to shift in how retirement is viewed: from a peaceful, restful time right before the end of your life to the biggest party you've ever had.  Nowadays, retirement is seen as less of a slow march to the grave and more a time to enjoy everything you've built for the past several decades.

3) Increasing reliance on personal savings: Quick, if you are under forty, name a friend your age who is going to get a pension and who is not a police officer, school teacher, or other public worker.  If you're like me, most likely you drew a blank while trying to come up with someone.  In the past several decades, there's been an increasing push towards personal retirement accounts (401(k) plans and their brethren) and away from defined benefit plans.  This trend is only going to continue in the future.

4) Less steady employment: With very few exceptions, the idea of going to work for a company after college (to say nothing of high school), staying with that company for forty to fifty years, and eventually retiring with a gold watch, a nice send off dinner, and a pension is all but laughable now.  With the average person holding multiple jobs throughout their lifetime (on average, eleven jobs between the ages of 18 and 44), there's a fair to good chance that you will not hold the same job through out your entire lifetime.

What the Future Holds

With all of these trends affecting retirement in mind, what do I think that retirement will look like over the coming decades?  Well, here are a few thoughts based on my own experiences and insights:

-(Many) More People Working Longer in Life…: The sad but true fact of the matter is that most people aren't taking the proper steps to save and invest enough to cover their retirement needs.  In spite of the cajoling from myself and other personal finance authors, TV hosts, and other commentators, many people, even people young enough to have known about this new retirement deal when they first entered the working world, aren't saving enough for retirement.  The good news is that, thanks to being healthier longer, they can spend more time working to shore up their retirement funds.  The bad new is that they'll have to spend more time working in order to shore up their retirement funds.  On the other hand…

-…And More People Will Retire Early: Let's be honest, there's nothing magic about your sixties that makes retiring during that time period ideal.  As people get used to the idea that they can retire whenever they have enough money to sustain themselves (ideally on the interest and other proceeds from the investments they choose to put their money towards, not the invested money itself), you can bet that there will be diligent savers retiring years, if not decades, before they need to do so.  Expect to see more fifty years announcing their retirements, as well as more than a few forty somethings.  If that weren't enough to help diversify the crowd around the retirement center pool…

-Expect More Mini-Retirements and Longer Breaks Between Jobs: With so many people switching jobs so often, it's inevitable that there will be breaks between their periods of employments.  One reason most people try to keep those breaks as short and infrequent as possible is fear that such breaks will appear less desirable to would-be employers; but with people spending longer and longer periods unemployed through no fault of their own, I foresee a time when employers are more concerned with how you spent your time, rather than how much time you had.  I think we'll see a rise in ‘mini-retirement‘ type vacations, from people looking to take a break from the workaday world, as well as more people using breaks in their employment for further education and possible career changes (much as I'm doing, going back to school for a higher degree).

-The End of Retirement, Period: No, I'm not predicting a dark day right around the corner where corporations stop allowing people to retire, forcing them to work right up to the moment they die.  (Although, that could make a good horror movie concept…)  Rather, what I'm talking about is a complete rethinking of the idea that there should come a point where you stop doing productive work in society, while you are still able to do so.  I foresee that before too long, ‘retiring' from your profession is seen as the perfect opportunity to do what you want in life, most likely starting a new job or creating other work for yourself.  You already see this with the most productive retirees; why shouldn't the idea continue to spread?

That's my idea on the future of retirement; what's yours?  How will the typical retirement in 2061 differ from that in 2011?  (Besides the fact that mostly robots will be retiring in 2061, of course.)  What other factors do you see making a big difference in how retirement will look in the future?

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