A New Retirement for a New Generation
New Retirement
Gone are the days of pensions and lifelong corporate loyalty. The new generation has a different definition of retirement and its living life on their terms.
Just about every year, studies are published in popular magazines that list “the best places to retire.” They have a whole list of criteria from climate and safety to cost of living and quality of healthcare.
The idea is that people will want to go somewhere else to live and experience retirement. The assumptions are that one, retired is defined as stopping work, no more working whatsoever.
Two, since you are no longer working you will want to leave where you currently reside and live with other retired people.
But is that really true? Do we want to stop working and leave our life where we live to live a different retired life somewhere else?
I think the up and coming generations will have a very different view of retirement and thus what it will look like for them. I mean who likes shuffleboard, really?
The old world view
The traditional view of life and retirement was as follows; get an education, get a job at a large and stable corporation, stay there until you retire and the company would take care of you for all your loyal service over the 40-year work career.
There was a pension and healthcare all there to allow you to have a happy retirement in, say, Henderson, Nevada.
All your assets were protected, your personal investments and savings were in place so you could simply walk away from the workforce.
That is and will be the prescribed path for many. Nothing wrong with that at all. The next generation may have a different notion of retirement.
We are already seeing this paradigm shift.
The FIRE movement
FIRE. It’s an acronym for “financial independence, retire early.” This model started to gain steam among millennials in the 2010s, through online communities blogs, podcasts, and online discussion forums.
According to Chris Hogan, “The goal is to save and invest very aggressively—somewhere between 50–75% of your income—so you can retire sometime in your 30s or 40s.”
Pretty easy right, just save half your income. Not sure how many people this is feasible for, but there is definitely something to be learned from the sentiment.
For people who have successfully done it, it’s less about quitting life and living on a beach. It’s about the freedom to choose.
Living life on your own terms. Working full-time or part-time is a choice, not an obligation.
How does the younger generation afford to do it now? Here’s a breakdown of how to make it possible:
So, let’s assume income and expenses are fixed, and neglecting investment returns:
- At a savings rate of 10%, it takes 9 years of work to save for 1 year of living expenses.
- At a savings rate of 25%, it takes 3 years of work to save for 1 year of living expenses.
- At a savings rate of 50%, it takes 1 year of work to save for 1 year of living expenses.
- At a savings rate of 75%, it takes 4 months of work to save for 1 year of living expenses.
At a 75% savings rate, it can take someone less than 10 years of work to save up and invest 25x the average annual living expenses suggested by ‘the 4% safe withdrawal‘ rule.
This type of aggressive saving and investing just doesn’t work for some people. But there’s probably a happy medium between FIRE and the traditional retirement view.
The happy medium
People no longer work for the same company for 30 years, building up a pension. In 1950, the average retirement lasted an average of eight years.
But today, with how long people are living, retirement can easily span 20 years or more.
Many of the new generations are looking at retirement as a life that includes both work and play.
The ability to do some work in the morning and head out on the road to camp in the middle of the week is the new retirement.
Money is important, but it’s not the only reason to work in retirement.
An equal number of pre-retirees said they plan to work in retirement for the money as those who will work to stay mentally active.
There are four distinct types of working retirees.
Driven Achievers (15%) feel like they’re at the top of their game, and even though most feel financially prepared to retire, they simply don’t want to.
Caring Contributors (33%) want to give back to their communities and usually work for a nonprofit or are unpaid volunteers.
Life Balancers (24%) keep working mainly to maintain social connections—but the money is a big help.
Only about 28% of retirees are Earnest Earners who work primarily to pay the bills.
Career ambitions aren’t just for young people.
Almost 60% of retirees said retirement is their chance to pursue a different type of work where they can follow their passions, enjoy a flexible schedule, avoid stress, and experience new things.
Working retirees are also three times more likely than pre-retirees to own their own business or be self-employed.
According to Pew Research, about 50% of American’s say they are very satisfied with their current job.
Many American’s will have a different view of retirement that combines their work with the things they love to do.
I mean what if you don’t even like to golf. Retirement will not be retirement for those who have not already learned to live life fully.
P.S. In case you are wondering what, the latest study says, here’s the list of the best places to retire in 2021 from US News and World Report:
- Sarasota, Florida
- Fort Myers, Florida
- Port St. Lucie, Florida
- Naples, Florida
- Lancaster, Pennsylvania
- Ocala, Florida
- Ann Arbor, Michigan
- Asheville, North Carolina
- Miami, Florida
- Melbourne, Florida
Category: Retirement
