The Invention of Retirement

It’s a scene that was forever burned into my mind. Not because it was some shocking incident that scarred me, but instead because it was an epiphany that really hit home.

We were on the preliminary leg of our Around the World gap year trip in 2013 when we rented a car to tour the island of Tahiti in beautiful French Polynesia. In hindsight, it was probably a mistake to start with French Polynesia, especially Bora Bora and the incredible Hilton hotel (paid for with hotel point) as it set expectations way too high for our next nine months of accommodations.

Only a few short months after that we found ourselves in an $8/night hotel off the Mekong river in Laos with Hello Kitty towels and the stench of something dying (or already dead) somewhere near our heads. But anyway, back to the epiphany.

We pulled our small rental car up and parked at the base of Vaimahutu Falls. We went early in the morning and had the place to ourselves. Just as we readied our hiking bags and locked the car, our biggest fear rumbled down the windy road and slowly came to a stop as a tour bus full of jovial explorers slowly poured out.

Outrunning the octogenarians to the waterfalls would be an easy accomplishment, but it meant our hope of seclusion in this magical spot was limited. As we raced to the overlook to hurriedly take pictures to appear as if no one else was around, the centipede of centenarians creeped up behind us. The roar of the waterfall was crashed by excited elderly adventurers.

As we mourned our fleeting moment of solitary, our thoughts flipped to how lucky we are, and how happy we were to be surrounded by our accomplished adventurers. We only hope to be making such exotic and bold trips at their ages.

Additionally, we remembered there were two more waterfalls upstream that we would need to hike to, and judging by their SilverSneakers, they wouldn’t be tagging along with us.

Maybe they’ve been adventuring their entire lives and this just the finis, a happy-ending to a well rounded life. Or maybe they were working their entire lives and this was finally the time they could get out to adventure, but a muted adventure that was capped by their limited abilities. It reminded us how lucky we were to do this a young, healthy and mobile age.

This was our epiphany – that we didn’t want to wait until we were of “retirement age” before we started living our adventurous life. Luckily, we were already on that track as we were just starting our gap year trip and would continue through five continents and 25 countries over the following nine months.

Retirement in our current understanding is a concept that’s only been around for 150 years or so. Before then, work was just a part of living and as long as you were able, you continued to work. Social nets consisted of the family, neighbors and churches.

Pensions first appeared on the scene in the mid-1800s based on the military pension system and opened up to municipalities’ public workers (cops, firefighters, teachers) and private companies joined along with one of the first, American Express, starting in 1875.

Most pension programs set the retirement age at 65 and the Social Security Act of 1935, which was part of the social safety net created by the New Deal, also used the 65th year as the official retirement age. At the time, the life expectancy for American men was 58.

Pensions continued until the 401(k) was born in the Revenue Act of 1978, but many lingered until the 2000s. However, many companies had already begun raiding the massive funds in pension accounts to make their own performance look better. It didn’t take long until companies saw pensions as a major liability as employees retired and lived longer. The average life expectancy in 1978 was 77.3 for women and 69.6 for men.

The burden of managing one’s retirement was then shifted to the employee, and soon all of the expenses were shifted to the employee as well. Around the same time, legislation enabling Individual Retirement Accounts (IRA’s) was passed in 1974 which allowed you start taking money penalty-free from your account at age 59 1/2.

Shortly after, Fidelity began offering 401(k) products in 1982 and built an empire based on individual’s retirement accounts which accumulated to over $6.9 trillion in 2019! At this point, Americans were fully convinced retirement age was 65 and Fidelity no longer had to educate us on that, but instead tailored their advertising to showing how they can help us retire at 65.

The concept of retirement at age 65 is so ingrained our minds, with the entire social structure built around it, that it’s hard to step off that little green Fidelity line. Where does that line lead us, anyway?

This social structure teaches us to fear early retirement as we might need to eat cat food when we reach age 90 and run out of money (not the organic cat food, that’s too expensive). That helps explain why Baby Boomers are estimated to be leaving $68 trillion in inheritances to the lucky next generation! Let me write that out, 68,000,000,000,000,000. Just kidding, it’s just 68,000,000,000,000 – does it really matter though?

While it’s incredibly important to build up enough savings and investments to retire comfortably, and it’s nice to leave a legacy with a charity you love or by paying for grandkids education, are people too devoted to accumulating a huge amount of money they’ll never get to enjoy themselves?

When I’m old, I envision myself rocking on the front porch and reading a book, with a nice luxurious vacation here and there, but I sure as hell won’t want to backpack around the world. I did that while I was young and had a good back.

Now that I’ve started my own financial services firm, I’m one of those private companies offering to help you figure out retirement (for a fee of course), but I want to deliver you to your adventurous life as soon as possible. It’s not my goal to see you stash away $1,000,000,000 which would generate massive fees for me, but then see all the fruits of your labor go to the next generation who might think you’re worth more dead than alive.

You can always set up a time for a free financial discussion where we can talk about where you stand and what your “green line” looks like!