The New, Fear-Free Retirement Strategy

It's the worst time to retire in a generation. Here are your solutions.

It's the Worst Time to Retire

A new analysis by the financial website Bankrate.com argues that it's the single worst time to retire in a generation. Whether you consider pensions (see also: Detroit), health care costs, 10-year gains in the stock market, bond rates, or annuities, the prospect for a traditional golden-years experience is dim.

The best advice that personal finance experts offer in the face of these bleak trends is to work five or 10 years longer if your health and energy allow, and to draw down your savings more slowly.

How To Love Your Job So Hard

But members of Generation Flux have better advice: Love your job so much you'll never want to quit. Our recent post on whether retirement's days are numbered led to an epic conversation in the comments.

Some readers raised questions about the research cited in that post: Is it true that retirement contributes to ill health, or is it just that sick people tend to retire earlier? But the study cited did find that employment had "health benefits" independent of other factors.

Most Fast Company readers, it turns out, just aren't interested in traditional retirement. Period. End of story.

Commenter Casudi summed up the thinking this way:

1) I am very good at what I do

2) I love what I do

3) I can’t afford to maintain my lifestyle if I give up working

4) Making the effort will keep me feeling young and (hopefully) continue to be interesting.

Elizabeth Spiers, writer and media entrepreneur, put the same argument in an essay in Medium:

"On a practical level, I’m not sure retirement will ever be financially viable for me. I’m certainly not counting on Social Security, and I don’t anticipate any Lotto wins in the future. But my primary concern isn’t that. It’s that much of what I do, I’d continue to do even if I didn’t need to get paid for it."

The Artisanal Career

As the fine print on every financial prospectus reminds the nervous investor, "past performance is no guarantee of future results." Just because retirement looked a certain way in the past doesn't mean it will be similar for the generations currently dominating the workforce, and that's not necessarily bad news.

People now in their 20s and 30s have spent more time getting educated, growing into their careers, and starting families than any previous generation in American history. Having been told all our lives that we are unique, we went into business for much more than a paycheck, believing in following our bliss and making a broader contribution. We've started businesses and nonprofits of our own in huge numbers. We've also gotten used to juggling gigs, short-term, part-time, freelance, independent and contract work, and in pivoting into entirely new industries, re-skilling when the opportunity presented itself.

Why, then, after spending all that time crafting an idiosyncratic, you might say "artisanal," career, would we turn around and walk away entirely as relatively healthy people in our 60s with no plan and nothing but a little dough in the bank to cushion us against the unknown?

The Never-ending Normal

It seems much more likely that the year 2045 will see 65-year-olds pursuing the kind of work we really love at a schedule we can manage, trying new careers we never had a chance to before, and maybe renting out our home and car, or picking up odd jobs at TaskRabbit to make ends meet. For the long haul.

Some may dismiss this kind of "plan" as little more than whistling in the dark. It certainly lacks the consoling official stamp that something like Social Security once did. It discounts the very real prospects of disabling injury, mental frailty, and illness, all of which fall disproportionately on the poorer and less well educated members of society. Our country just has to find a better way of holding up the people who can't hold up themselves.

But, for those of us who are lucky enough to have something we love to do it's hard to think of a better plan than to just keep at it. Or as the eminent medical writer Dr. Oliver Sacks put it in a recent essay:

Perhaps, with luck, I will make it, more or less intact, for another few years and be granted the liberty to continue to love and work, the two most important things, Freud insisted, in life.

Dr. Sacks is 80 years old.

[Image: Flickr user Tom Bech]

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3 Comments

  • awakeinwa

    Every generation encounters a world that is upside down and uncertain compared to the previous. Oil shocks, dot com bubbles, financial overleverage, and now bond inversion amid liquidity aplenty. There is no way to predict variability and volatility at any given point in time. But it is certainly safe to say short of a nuclear war, the market will yield you superior performance. The key is to diversify and box your risks. If you are near retirement age and don't have enough to retire, you are better off leaving your money in the market invested in a mix of dividend, small- and mid-cap funds, in addition to solid outsized performers like Costco, Starbucks, to Boeing. Companies that have long-standing competitive moats. This is after accruing 6-12 months savings that you build up diligently as you continue working. Dividend funds will give you lower returns but with dividend yields during good and bad times - 7-12% avg returns plus 2-3% yield; recently Fortune 500 cos have raised dividend yields 22%. Not too shabby. Small and mid cap funds will outperform the general market and large-caps by 3 points on average. Over the last 3 years, it has yielded 25% versus S&P's 18%. Now obviously good times don't last forever as the author noted. But for those math and econ inclined, you'll have observed that even during the 2009 crisis, there was a peak to trough to rebound that lasted about a year. One of the worst financial crisis lasted a year dropping 25% and rebounded within a year only to encounter another headwind in 2011 with a flat market. The key finance rule of thumb to keep in mind though is that in any given year, a dozen to two dozen of the top days account for 80% of all gains; the same applies for 80% of all losses. If you withdraw from the market or move your assets to bonds for "safe keeping" garnering the losses but miss the random walking subsequent dozen or so days of 80% rebound, your investment monies will have to work twice as hard to recoup the losses, if not an order more if you keep it in bonds. So the key then is to ride it out knowing these finance axioms. Small and mid cap funds and high growth companies can return super performance double the market avg. Recessions last a year but rebounds always occur in those dozen days you can't time and have to stay in to recoup losses lest you miss the ride back up. If you don't use these lighter momentum cap stocks to your advantage when you most need it, you are letting fear get the best of you. It is all about classes of paper and their relative performance to the broader market. Small- and mid-cap will always give you relatively better performance. Choose VISGX as a starting point. Don't let the talking heads tell you that retirement is all downhill returns. Tranche your savings and investments so you have 1 year of savings whereby you can live at 50% of income, and diversify the rest so you can take advantage of outsized performance various capital classes afford. The 2009 experience was very instructive as to how deep and bad things can get. And frankly knowing that is half the battle.

  • Anthony Reardon

    I often say retirement no longer exists for my generation. Instead you would do better to expect periodic unemployment and reeducation throughout your career.

    With that said, you retire every once in a while, taking advantage of downtime between jobs. However, at the same time you are always working on the next step in your career. People can expect to work for as long as they are capable...ideally until they die.

    There is still a question of living off retirement savings, but I find contemporary concepts for that dubious. More likely, what you need to think about is moving up and making enough money that you can afford to retire or semi-retire off what you earned. I project people will be faced with a matter of saving vs. investment on their earning capabilities.

    A lot of this has been proposed as indicative of the knowledge-based economy- a new kind of volatility in the business world. With that, most investment mechanisms in financial industries might actually prove consistently unreliable over the long-term. In other words, you might not have any choice but to keep working, and the only relief you can look forward to is what you are able to earn.

    With that, more people will look to gain the initiative by competing more aggressively and persistently for higher paying jobs- or turning to running their own businesses. In both cases, being that these represent activities that are going  to be something you have to live with, the biggest ambition is going to be to find something to do that you can both love and get paid comfortably for.

    Best, Anthony  

  • George Brock

    This may be the worst time to retire if you didn't plan and save. But then again anytime would be the worst time if you didn't do that. The key to saving/investing for retirement is to plan, start early in life, be consistent and take advantage of any employer matching plan. Also avoid unnecessary risks (no get rich quick schemes, don't send money to anyone who sends you an email from Nigeria, etc.) There are many sites that provide retirement information for planning. One of the sites I like is Retirement And Good Living. Great information on a variety of retirement topics.