Then, the concept of retirement took on a new connotation. Instead of retirement as the culmination of a long period of work with one company, retirement came to mean the end of your working life. Period. In this theoretical world, you could sit back, relax and enjoy the fruits of your labors and do the things you didn’t have time for during your working years. You could travel, spend time with the kids and grandkids, volunteer and generally focus on the things that make you happy.
Sometimes the theory worked, and sometimes it didn’t. Life expectancies increased, but longer life often means increased illness and medical costs. If you are ill, you are not able to do the things you would like, and retirement funds pay for doctors instead of travel.
Our society has continued to change. New legislation has enabled companies to transfer retirement responsibilities to employees via 401(k) accounts. Complex financial products became available to all people, not just Wall Street elites. We became more mobile and few employees stayed with the same company to be able to “retire” from it. Retirement savings for baby-boomers turned into a tricycle of Social Security, some pension, and personal savings. A more stable vehicle, but one that is more complicated to build and manage, goes faster, and has no brakes.
So where are we today? Over 60% of Americans believe that Social Security will not be available when they retire. Businesses have all but stopped funding pension plans. Employee paychecks are squeezed to the point where savings are excluded in order to pay everyday bills. It seems we have almost regressed back to a unicycle retirement standard where everyone will work.
I would like to see retirement evolve into a park bench. A bench is stable and sturdy and not complex to build. The legs are deep and wide. To create this bench, workers need to use the tools that are available. Let’s discount pensions, but do include a small Social Security payment, supplemented with part-time work doing something you love. Creative insurance planning can widen the base to make it stable. That takes care of the first leg. The next leg consists of personal savings. Employees need to start saving with their very first job so it becomes habit. I believe that regular contributions over a long period of time and annual asset allocation review will allow even a modestly paid person to retire in comfort. Not extravagance, but comfort.
A park bench seems a slow, quiet place to relax and enjoy the surroundings. So build your bench in that environment. A smaller house, a used car, and fewer “things” may help us slow down long enough to enjoy family and friends now, and be around later to do the same. As others go speeding by you on their “cycles”, you can relax and know that you won’t fall off in a speeding accident.