Shifting the Retirement Paradigm: Why 87 is the New 65
Kim Butler
I help young families get to Accredited Investor status and not slide backwards via our Prosperity Pledge which utilizes an Income Under Management approach with Currence and Whole Life.
How much do you know about your own retirement? How much has been painstakingly planned out, even if it’s 30 years away? The unfortunate problem with the concept of retirement is that people think they know what to expect. They intend to be on a beach in their golden years, with plenty of money to live the life they’ve always wanted to.
No one wants to find themselves unable to enjoy these years. And yet, few people plan for a future that doesn’t go exactly how they want it to. Many retirees don’t have sufficient cash reserves for a retirement that could theoretically last from age 65 to age 100…or beyond. Fewer still have a real game plan for disability, illness, or injury.
That’s why we’d like to pose an alternative. One that keeps you working within your purpose for longer, and reframes the typical concept of retirement. The truth is, life expectancy has left the “old way” of retirement in the dust. It renders the concept unstable at best.
To understand this, let’s look at how retirement began, as well as the modern factors of the retirement paradigm.
Table Of Contents
- The Beginning of Retirement as We Know It
- We’re Living Longer
- Why We Aren’t Typical
- Retirement: What Needs to Change?
- Changing the Retirement Narrative
The Beginning of Retirement as We Know It
The roots of modern retirement date back to 1881, and Otto Von Bismarck. The conservative Prussian Prime Minister, age 74 at the time, proposed a radical idea: government-backed support for the older members of society.
In general, people that lived also worked–regardless of age. Yet some of the older population was finding it difficult to work due to disability or age. William the First, in his German Parliament letter, wrote: “. . . those who are disabled from work by age and invalidity have a well-grounded claim to care from the state.”
And so it began that anyone over age 70 would receive financial assistance in the form of a pension. (In 1916, it changed to age 65.) The catch? It aligned with the life expectancy of the time. It wasn’t designed to support those who lived beyond expectations for another 20, 30, or 50 years. It was designed to care for the “outliers” who lived beyond life expectancy for a few years and to create smoother transitions for the new workforce.
Even so, by 1935, the American government officially implemented its own form of government-supported retirement. When the Social Security Act passed, the official retirement age became 65. Incidentally, the life expectancy for men in 1935 was 58. This became the “default” retirement age in America.
We’re Living Longer
Today, we can’t imagine a world that doesn’t include retirement. A concern though is that while the modern retirement age is still 65, life expectancy has steadily increased in the last 85 years. And thanks to advances in the medical field, health and dietary changes, and quality of life improvements, the rise in life expectancy continues to climb.
The Macro Trends chart below shows how life expectancy increases over the years. The blue line is the life expectancy line It continues to rise, and for 2020, it’s 78.93:
If we expand the number of years until 2100, the life expectancy line increases further still:
According to the Centers for Disease Control (CDC), life expectancy gives us the average number of years a person can expect to live. Based on the Macro Trends data above, U.S. life expectancy projections are about age 78.93 for 2020. This doesn’t factor in Covid-19 which may represent an outlier and skew the data. Age 78.93 is a 0.08% increase from 2019 and a 0.03% increase from 2017 when life expectancy was 78.84. Chances are, you know people who have lived well beyond that age who may live on a fixed income for decades.
It’s worth noting that those who are 65 today seem younger and healthier than those at the same age in the 1930s. Hence, some retirees delay their retirement because they love what they do and they want to optimize their social security benefits.
So why do we still accept retirement at age 65?
Why We Aren’t Typical
It’s impossible to know how long we might live, and yet people plan for retirement as though it is set in stone. That’s why many typical financial strategies miss the mark.
The problem is twofold. First, you want to save enough money to enjoy your retirement. And second, your retirement includes accumulating money that starts distributing at age 65. Often, the funds are undercut by the fees and taxes that accompany qualified retirement accounts. However, with longer life expectancies, we’re seeing an increase in retirees running out of money.
The alternative approach is also twofold—finding and pursuing the passions you enjoy, so that life doesn’t become something to escape from. Then, building...
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