At school we are taught a traditional view that retirement is a certain age when you are old and cannot work anymore. The assumption is that you will work your whole life to get to this point. Once you reach retirement you have saved enough money to live off without working or the state will provide for you. We need to redefine a new retirement of financial freedom instead of employment jail.
The school system and our society is training you to be an employee for life. The idea is that you must work for your whole life until you reach the retirement age of 60-65 and can’t work anymore. Then you have to retire.
The big problem is that we get an education and then get a job and that’s it. There seems to be only this one option. When you get a job you buy a car you buy a house and the cycle of lifestyle creep starts. You upgrade cars and houses and buy all the nice things that make you happy. Hopefully you contribute to pension fund, usually not enough because you are spending too much. So you have to carry on working for 45 years and then you can retire at 65.
Why not rather design a life for yourself of which a portion of it is to earn money to be able to be financially independent? They don’t tell you why you need to do all of this. They don’t tell you that you have the ability to do so much more than just be slave to a job for 45 years. You have other options and you can make other sacrifices to live a more rewarding and wealthy life. Its not necessary to be rich and famous to live a different life. You just need to make some different choices and sacrifices to design a life of your dreams. That life does not have to involve 8 hours of work everyday until you retire.
Retirement is an employment trap
The concept of retirement has been around since 18th century. It was born from the idea that at some point you reach an age where impairment will prevent you from working. This was during a time when life expectancies were under 40 years. Also it was a time when there was a lot more manual labour. So it really was retirement from the ability to do meaningful work. At this point society should then provide for you.
Modern retirement was introduced in 1889 by Germany’s Chancellor, Otto von Bismarck. The original concept and reasoning put forward in 1881 to the German Parliament was “. . .those who are disabled from work by age and invalidity have a well-grounded claim to care from the state.” The initial age chosen was 70 but then in 1916 it was lowered to 65. The German government introduced a retirement system that mandated contributions from the employee, the employer and the government to be paid out at retirement age.
Canadian physician William Osler in 1905 called the ages between twenty five and forty the “15 golden years of plenty”. This is when your best work can be done. According to Osler, workers between ages forty and sixty are tolerable and after age sixty the average worker is useless and should be put out to pasture..
Since the 1800s certain US municipal employees received state pensions and around the 1920s a variety American industries started implementing pensions. It gained momentum in the industrial revolution where older workers were less efficient and rising youth unemployment was potentially a problem. It was the US social security act that formalised the age of 65 after considering the German model amongst others.
South Africa doesn’t have a formal retirement system although there is now talk of a state managed fund. Currently government employees have a retirement age of 60 while corporates range between 60-65 years old.
Retirement is outdated
Retirement is an ancient outdated model that needs a rethink. It was based on the fact that you have to work your whole life until you can’t anymore. Then you rely on the state to provide for you. Disguised as assistance retirement is actually a built in dependency program to keep you employed.
This model is being challenged by newer generations especially the millennials and GEN Z. Even the GEN X generation is challenging it. This is a great article “Why Retirement Is a Flawed Concept” by Neil Pasricha because it explains why concept of retirement is feeling flimsy and needs to be challenged.
So many things have changed that make this old retirement model completely out dated. Life expectancy has increased and people reach retirement age much healthier. The nature of our work has become less physical and more remote and less geographically dependent. Travel is easier and there are so many other options and ways to work and contribute to society.
Young people are also looking for more meaning and purpose in their lives. Looking at their parents having spent their whole lives working with not much to show for it has made them rethink the model. The new retirement should be a life of financial freedom instead of employment jail.
The problem with retirement as we know it
There are several problems with this outdated model of retirement.
We are living longer
You have heard the sayings that 50 is the new 40 and 60 is the new 50. Well it is true. Despite what we sometimes think the world population is getting older and we are healthier and living longer. A combination of better medicine and reducing poverty has contributed to this. Many people don’t want to have to retire from their jobs or they want to start doing something else. Doing one thing your whole life is becoming less viable as people have multiple careers and jobs.
The next problem is the issue of affordability. The social problem that exists now is that very few if any countries can provide an adequate state pension for you to live a comfortable life after retirement. This is because life expectancy is longer so the cost is higher. Developed countries have declining aging populations with too few young people to fund the old people. In developing countries, unemployment is a problem so the state has another problem. Working longer is a problem because it blocks employment for younger people.
Remote work and travel
The nature of work is rapidly changing. Machines are doing more of the manual labour and production is automating and digitizing. This leaves us with less physical work and the ability to do more remote work. Work is becoming more mental and less physical so again it means you can be more productive for longer. That means you can work differently and have more options as to how much and how long you work and where you work from.
Meaningful work and purpose
The last problem is related to your life purpose. If you work your whole life and that was your only purpose then when you retire you are old and have no more purpose. This can explain why so many people die soon after retirement.
All of these changes mean that there are so many different work options. People are more aware of different options and choices. So work can be more fun and meaningful. The industrial age days of working to the clock 9-5 in a miserable job are changing. Newer generations have different attitudes to work and what they want out of life. Everyday individuals are more empowered and have a greater impact on society so they are more concerned with life purpose and contribution.
We need to rethink and reframe retirement. It should rather be retirement with financial freedom instead of a life of employment jail.
We need to question traditional retirement
Our society gears you up to keep you employed until 65. We need to question this.
You should ask yourself some questions before you start working life
- What is the purpose of us working for 45 years?
- What will you do with your life once you have retired?
- Why is there only 1 option in life that is to work for 45 years?
- Would you rather work your whole life or be able to retire early?
- Who decided that we all have to work for 45 years before we can retire?
- Is it normal to spend your whole life working 9-5 and only have a few years of freedom?
Ask yourself these questions and think about the answers. Don’t just accept the normal path as your only path. There are so many different ways to design your life. You have so much more purpose than simply working and then dying.
A new retiremet model of financial freedom instead of employment jail
I prefer to think about retirement as the point at which you become financially independent. No matter how you look at it, at some point in your life you need to have money to sustain yourself for when you can’t work anymore. The best way to do this is to use your most productive and energetic years before 40 to achieve this. Once you have achieved financial independence you have options to be able to do what you want.
It also gives you more time to be able to find a new different or more interesting path that can sustain you mentally and physically into old age. So retirement should be a financial number that you aim for. It is a number that allows you to be independent. You need to be independent of formal employment and be independent of the state or even friends and family for that matter.
The financial independence option is where you have a focused period of 5-20 years of work. In this period you save and invest all your money to build up your retirement fund sooner. This then allows you to retire earlier. Or at least it gives you the option to retire earlier.
Imagine if we could reinvent retirement. Instead of the old state sponsored work till 65 and then die system we have another system. A new early retirement societal system geared up to work for 5-20 years to build financial independence. Just the same way as we have pension funds retirement products etc. Why not have early retirement options that allow people to escape the retirement trap and get out early.
We should reframe the new retirement as financial freedom instead of employment jail.