Why Increased Longevity Means You Need To Rethink Your Retirement

It’s no secret that many people today are living longer compared to previous generations, extending their retirement years well into their mid-80s and 90s. That means that today’s older workers will need to fund longer retirements. Unfortunately, however, many are approaching their retirement years with modest savings.

How can you address both of these critical issues? You can start by rethinking your arc of life. Let’s contrast the course of a typical life in the 20^th century, the period when many of today’s older workers grew up and formed expectations of the life stages they’d experience.

Retirement And The 20^th Century Arc Of Life

Many people in the 20^th century lived through three phases in their lives, as shown below:

In the last century, middle age was roughly defined as your 30s, 40s, and 50s. It was often an intense period with a focus on pursuing careers and raising families, and many workers arrived at their retirement years burned out or physically worn out. Retirement was sold to this group as the antidote to that intense phase, and they often transitioned abruptly from full-time work to full-time retirement.

Many workers at that time participated in traditional pension plans that delivered lifetime retirement income. When retirees in the 20^th century combined these pensions with Social Security benefits, they often didn’t need to worry too much about saving enough money to last the rest of their lives. A healthy stock market and rising home values also helped workers afford retirement in their early to mid 60s.

Today’s retirees and older workers formed their expectations about their last half of life and when they could expect to retire by observing the experience of their parents (the folks described above). However, these expectations aren’t realistic for most people in the 21^st century. Let’s examine why.

Retirement And The 21^st Century Arc Of Life

Today, many people are approaching their retirement years with good health that can last well into their 70s and beyond. However, most companies no longer offer traditional pension plans. This forces people to rely on their own savings, which are often inadequate, to fund retirements that can last a few decades.

As a result of these issues, some pundits are suggesting that retirement is an outdated concept that itself should be retired. But this view may also be unrealistic. An alternative view would be to see our lives as consisting of four key stages, not three, creating a middle ground between the 20^th century arc of life and the extreme view that retirement should be abandoned completely.

The 21^st century arc of life includes a second middle age that lasts roughly from a person’s mid-50s to their mid-70s, as shown below:

Another name for this second middle age could be the “go-go years.” In the transition from the first to second middle age, many people will still be working, though they’ll be winding down their careers. And if they raised families, their kids are becoming adults who are living independently. As a result, the second middle age can be characterized as a period of freedom from raising families and the intensity of careers.

Many people in this second middle age will be vigorous, healthy, and able to live independently. They may also be able to continue working for money if they need to make ends meet, which may be necessary due to inadequate retirement savings.

One challenge with the view that retirement should be abolished is that most people will eventually reach an age—their “slow-go” or “no-go” years—when they’re physically unable to continue working for money or don’t want to continue working. At that time, they may still have a decade or two of life left, so they’ll still need the traditional retirement stage defined as “not working.”

My wife and I are in our early 70s, and we’re embracing the freedom and independence of our second middle age. Our perspective helps us enjoy this time in life. We’re also planning for the reality of the no-go years of our retirement, so that we don’t fear that time of life.