Ric Edelman shares some intriguing perspectives on the how the separation between work and retirement is becoming more porous. Retirement, he reminds us, is changing dramatically.
1. Longevity is a reality.
The traditional lifeline - you're born, you go to school, you go to work, you retire, you die - one thing at a time in that order, is no longer valid. That is the old paradigm of retired at 65 and dead at 80. This is what our great grandparents, grandparents and parents experienced. We're now in the aging and the cyclical lifeline. And it's all because of longevity.
If you are reading this, the odds are really good that you're going to live to age 100!
The exponential growth of changes in longevity are due to advances in medicine and neuroscience, bioinformatics, 3D printing, nanotechnology, and so on. They are contributing to our longer life spans. Over the next 15 years, we're going to cure the leading causes of death, we're going to eliminate heart disease, respiratory illness, obesity, diabetes. Cancer itself over the next 15 years will be gone. And what has been killing people in their 80s and 90s, is now going to allow us to live to age 100-plus.
2. Longevity will change the way we approach retirement.
If we're going to live to age 100, the notion of retirement at 65 is impossible.
Economically, most people will never afford to be able to do a 40-year retirement.
Second, you're not going to want to. At 65, you're going to be healthier than your parents were when they were 65. In fact, due to medical innovations, by the time you're 95, you'll be healthier than when your grandparents were 55. And so, you're going to want to be active and contribute to society. And you're going to need to make money at the same time.
So this notion of “retirement” will be replaced by going to school, going to work, and then going back to school to get new skills, to get more training, to stay viable in the marketplace. And then, you'll take a two or three-year sabbatical—forget about a 2-week vacation—you'll take years’ long sabbaticals, and then you go back to school for more training, go back into the workforce, and the cyclical life of school-work-sabbatical will be how you live until you are age 100.
This requires an entirely new set of thinking about our approach to money and career and college and family in a way that is unprecedented.
3. Longevity will change the way we approach life.
The reason people want to hang up their boots is because their job is no longer fun or interesting. A person may believe that she has 30 years of experience. No, she doesn’t. She has one year of experience 30 times. By the time she is in her sixties, she has been doing it for decades. It’s rote. Monotony sets in. The innovative fun and discovery element is long gone. Boredom sets in. And she might not like the new company environment, or the sacrifice. She may be beginning to recognize her own mortality, and would rather go do something else. And that is perfectly understandable. And this causes people to retire in their 60s.
But after a few years, boredom sets in. Along with the lack of social interaction, lack of intellectual stimulation, and the lack of economic remuneration. And yet you feel physically and mentally fine. You're still perfectly able to engage. And this is when people figure out that it's time to reinvent themselves. And they do it by entering a brand-new career or start a new business. More businesses are formed by people over the age of 50 than people under the age of 30. They will go back to school and get a new degree. They will engage in educational travel, not just for vacation, but for learning. And they will discover that they now have opportunities they didn't have before, because the kids are grown, and the dog has died. They're free and clear on what they want to do. They now have money, are debt free, and have the time. And they're going to take full advantage of this.
Sitting in front of the TV and eating bonbons, that's fun for a couple of years. But you will drive yourself crazy if you have to do it for a couple of decades.
4. Longevity will change the way we approach work.
Going to go back to work in “retirement”, doesn’t mean but you're going to go back to a 40-hour workweek. You're going to work for 10 hours a week, or maybe 15 or 20 hours in a month. You'll make $10,000 or $15,000 a year. You don't have to make $100,000 a year; $15,000, $20,000 in a year to supplement your income is plenty to allow your nest egg to last as long as you do. So, all you got to do is work an extra year or two in your career. Don't retire at 65; retire at 67. And then, go get a part-time gig until you're in your 70s. And you'll be amazed at how impactful that is in making sure you never run out of money.
Who is Ric Edelman?
Ric Edelman, is the author and founder Edelman Financial Services and Digital Assets Council of Financial Professionals. He is also on the advisory boards at the Milken Institute's Center for the Future of Aging and the Stanford Center on Longevity.
The above has been taken from Ric Edelman’s conversation with Morningstar's Jeff Ptak and Christine Benz. Christine is director of personal finance and Jeff is chief ratings officer.
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