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Don’t Retire.

I just read what is without a doubt the most thought-provoking thing I’ve encountered in a good while: Chapter 4 to Stephen Pollan’s Die Broke. The chapter is titled “Don’t Retire.”

Now, I’ve read that piece of advice several times before. Many people make the case that if you’re doing work you love, there’s no need to plan on retiring. And that makes sense to me.

But that’s not what Pollan is saying.

He’s saying to give up the traditional idea of retirement because it’s a lost cause. Literally. He believes that the Baby Boom generation and those after it have roughly zero chance of retiring in the way that our society has come to imagine (that is, retire at age 65 then play golf in some nice sunny community in Florida until the day you die).

The history of retirement

Pollan explains that the concept of retirement didn’t even arise until the Great Depression. As part of the New Deal, Social Security was created. The goal: Pay the older workers to leave the workforce in order to make room for younger workers. Of course, back when the age for Social Security benefits was set at 65 years, the average life expectancy was only 62 years. In other words, the first generation to receive Social Security enjoyed, on average, very short retirements.

It was the second generation to retire (the Baby Boomers’ parents) that actually created the spend-the-rest-of-your-life-traveling-and-playing-golf image of retirement. However, Pollan argues that their ability to retire was simply the result of a freak coincidence of economic forces:

  • They had absolutely no doubt as to the solvency of the Social Security system.
  • Many had been able to accumulate wealth through their entire working years due to never having had giant student loans to pay off. (The GI bill had covered college for them.)
  • More than half of them had pensions.
  • As they were retiring and selling their homes to move southward, they were able to make out like bandits due to the spike in demand created by the Baby Boom generation becoming the right age to start buying houses.

Is retirement impossible?

Pollan argues that none of those things will be the case for future generations. To make matters worse (in terms of being able to retire), every generation is likely to have a longer life expectancy than the generation before it.

Combine those facts with the reality that most investors:

  • Invest far too little,
  • Invest far too conservatively, and
  • Ruin their returns by bailing out of the market after declines…

…and you get a bleak picture indeed.

But look at the bright side!

Fortunately, giving up the idea of retirement as the ultimate financial goal can be surprisingly liberating.

A few thoughts:

  • When retirement was created as a goal, older workers were less productive than younger workers. (A huge portion of the work being done was still manual labor at that point.) This simply isn’t the case today.
  • It frees you from the necessity of having saved X dollars by age Y. You’re no longer in a race against the clock. What a nice feeling! (Of course, that doesn’t mean we wouldn’t need to save & invest at all. It’s very likely that even if a person doesn’t retire completely, his/her income would still drop significantly starting around age 60, so having investments to provide income is still necessary.)
  • If you’re planning on working forever (or close to it), disability insurance becomes extremely important.
  • Doing work that you truly enjoy becomes that much more essential.

What do you think?

Is retirement (in the traditional sense) an attainable goal for most people? Should we even be striving for it in the first place?

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Comments

  1. Hi Miranda.

    You pretty much explained my plan spot-on. The concept of income that keeps coming after I stop working is a big part of why I’ve been building a business the last couple years.

    Also, I hadn’t heard the term “gig economy” yet. I love it! :)

  2. Mike, great thought-provoking article! I just wrote about retirement from a Christian perspective on Crackerjack Greenback and mentioned your article at the beginning.

    As a financial planner, I cannot fathom how most Baby Boomers are going to retire – much less in the way that they dream. They have very little savings on average and most don’t have a pension any more. Then you get to my generation – we’re paying 12.4% in Social Security taxes (not including the Medicare part) but we’re not even sure if we’ll get Social Security. At least they got one half of the name right (social…ism)!

  3. I think with the gig economy, it will be possible to keep some sort of revenue stream, even during “retirement.” I can keep writing, and my husband will likely be able to do some consulting. We can do as little or as much as we want, and as long as we keep investing now (especially with investments at bargain prices), and do it throughout our “prime” age, we should be fine.

  4. I personally wonder if this freak miracle of early retirement could potentially have some way to run. I know it seems crazy right now (especially looking at my investments! ;) ) but on a global scale there’s still lots of young workers entering the workforce, effectively bidding up assets (from tortillas to copper to Monets) and looking for investment in return for a stake in their futures.

    I mean of course emerging markets. Whether the West has sufficiently oriented its wealth to tapping into emerging markets is another matter (companies might have, but citizens have fueled emerging market growth by buying goods without taking a stake in those businesses by investing).

  5. Monevator, that’s a great point you bring up!

    Have you ever read The Future for Investors by Jeremy Siegel? The final third of the book is all about how he expects our stock market (He’s writing about the U.S., but I’d imagine he makes the same case for the UK.) to be bailed out by inflows of cash from investors in “emerging market” countries.

    Basically, he argues that rather than fearing the growth of China, India, etc, we need to be cheering them on. Pretty interesting stuff I thought.

  6. I haven’t read it Mike, but it sounds up my street. Thanks for the tip!

  7. financial advisor says:

    Add to this the fact that people live 20-30 years longer than they did a hundred years ago. Retirement wasn’t possible when you didn’t live past your 50′s.

  8. Definitely need to love what you do.

    Ray Kurzweil’s book The Singularity is Near even predicts a time within our reach we will be able to completely prevent non-accidental deaths.

    Try to retire then!

  9. Haha, indeed.

    That book has been on my “to read” list for a while now. It sounds just crazy enough to make it fascinating. :)

  10. “Is retirement (in the traditional sense) an attainable goal for most people?”

    For a large percentage of the population, it would seem to be mathematically possible. However, most people won’t be able to obtain it because we have a society focused on immediate consumption. And of course, many people also don’t want to obtain it in the first place.

    “Should we even be striving for it in the first place?”

    If retirement is defined the way the book author defined it, then I suppose not. But I felt like the author had a pretty unidimensional view of what retirement means. If you talk to retired people, there are a thousand different stories. Retirement is not just about playing golf every day in Florida.

If you want to discuss this article, I recommend starting a conversation over at the Bogleheads investing forum.
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