I heard Mitch Anthony, founder and president of Advisor Insights Inc., speak at a retirement conference recently, and he said “retirement doesn’t work.” This really resonated with me. Having spent 22 years in this industry working as a retirement specialist, I personally don’t have any desire to retire. Look at Warren Buffet. He is 88 years old, and his business partner Charlie Munger is 94! Based on their ages and published net worth, clearly these men can afford to retire. You may feel the same way about wanting to keep working, or if you are a pre-retiree, you may be trying to figure out the next step. In fact, I’m often asked, “do you think I should retire early?” While there is no way for me to answer that for you, I’d say the majority of clients I work with, who do retire early, later wish they would have worked a few more years.
Even the retirement age we use is outdated. Europe’s first pension system was created in 1880 by Otto Von Bismarck. He chose age 65 for the retirement age at a time when the average man's life expectancy was only 47. We have continued to use age 65 as the predetermined age one should expect to retire even though people are living longer. According to the Social Security Administration, the life expectancy for a 65 year old man in the U.S. today is over 18 years and for a woman it is 21 years.
Mitch Anthony calls retirement an “artificial finish line.” It was an industrial age construct for people who worked in an industrial age environment. He observed that leisure has little meaning outside of work. A vacation is valuable because you are taking a break from work, but we were never meant for a perpetual life of leisure. Instead, a balance between work and leisure should be the goal. According to Anthony, “work is something that brings value to others and meaning to you.” In a 2017 Rand Corp. study, when retirees were asked what they missed the most about pre-retirement life, surprisingly the answer was not the income. The most popular answer among retirees was the work itself, and more specifically, working with their former colleagues. As human beings, we are innately social creatures, and retirement has often been shown to lead to increased isolation, which has been shown to affect our health.
In fact, working just one more year can add seven quality years to your life (MIT Age Lab). Imagine, adding seven quality years to your life simply by working one additional year. Retirement therefore is not merely an economic proposition. Anthony went on to say that having money isn’t enough and that “the only people who understand what money can’t do for them are the people that have it.”
So what should pre-retirees consider before they retire? I would ask the following: What observations have you made watching other retirees? or Whose retirement do you want to model? In addition, what activities, besides a long “to do” list, will replace your work schedule? You’ve spent 40+ years working 40 hours a week and now you’re about to stop completely. You must find a way to fill a large percentage of that time. One might consider working part-time in retirement or taking up a completely new career. I find the real issue for pre-retirees is that they are simply burnt out from doing the same job for a really long time. Often, a complete change brings renewed energy, which can lead to many years of enjoyable work. All of this points to making sure you have a sense of purpose no matter what age you decide to retire.
T. Eric Reich, CIMA, CFP, CLU, ChFC is president and founder of Reich Asset Management and can be reached at 609-486-5073 or email@example.com.
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