Re-thinking the traditional retirement – Episode 119

Financial Autonomy - Blog
Re-thinking the traditional retirement – Episode 119

I read a great quote on the weekend attributed to Princess Elizabeth Charlotte of France in the 18th century. She was asked when sexual desire ended and she responded “How would I know, I’m only 80.”
Between 1870 and 1970 our lifesplans more than doubled globally. For the thousands of years of human history prior to this massive leap forward in longevity, most humans did well to make it into their 40’s. We lived long enough to reproduce, protect our children until they could fend for themselves, and then we were gone.
Yet today in Australia we have a life expectancy of 82.5 years, and according to a recent article by Amanda Hooton, in wealthy countries like Australia “life is lengthening by more than five hours a day, every day”.
In this post we’re going to look at how the traditional picture of what retirement looks like could evolve to better suit the realities of modern day life in Australia.

Baby boomers reinvented retirement. Whereas retirement was once a phase of life where you were largely worn out – you retired because you could no longer keep up with the physical demands of the job – baby boomers carved out a new phase of life, the “active retirement phase”. Here they ceased work whilst still healthy, and enjoyed a period of a decade or more of leisure and relaxation, before the inevitabilities of old age took their toll.
But as we live longer and healthier lives, and face changes like larger mortgages due to rising property prices, kids staying at home longer which crimps parents ability to save, and increasingly expensive healthcare costs, the baby boomers version of retirement is likely to be unaffordable for most workers under 50 today.
So how might Gen X and those that follow re-imagine retirement? Well, here are my thoughts.


Is 40 hours a week still right?

The idea of a standard working week consisting of 5 days of paid work, 8 hours each day arose during the latter part of Industrial Revolution, and became broadly adopted throughout the world during the first half of the 19th century. Prior to its adoption, 6 day working weeks, of 10-14 hours per day was common, as was child labour.
But as we live longer and healthier lives (no doubt in part attributable to not being sent down the mines to work 10 hours days as an eleven year old), is their scope to scale those working hours back further?
If instead of looking to leave the work-force entirely at age 60, we were prepared to work through until age 70, then that’s 10 years of retirement savings we no longer need to sock away. Plus, the savings we have accumulated have an extra 10 years to grow, quite conceivably doubling over that extra time.
So providing for retirement becomes a lot easier, and the longer we are prepared to extend our working lives, the easier it gets.
If we don’t need to save as much, then perhaps we don’t need to work as much either. Perhaps 3 days per week in paid employment, for instance, would be enough to meet our needs.
The rise of the gig economy is perhaps a partial response to this realisation. Uber reported that 51% of its drivers work 15 hours or less per week. This is a job where you can choose to work as much or as little as you wish, so it’s informative to find that given the choice, most workers choose to work far less than a traditional 40 hour week. Now of course the reasons for this will vary widely – for most they will be undertaking this gig work to supplement some other activities, for example university studies, or a second job. But it’s not hard to see how such flexible work arrangements could well suit someone in later life, whose incomes needs are reduced once the kids have finally moved out and the mortgage burden has been overcome.


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Career breaks

It’s common in academia to take sabbaticals of 6 months or sometimes more to get out of the normal flow of working life and broaden your knowledge and experience. Wouldn’t it be wonderful if these career breaks were available to more of us? As with the potential to work fewer hours per week, the ability to continue in paid employment for longer provides more scope to take some longer breaks. Too many people put off fully enjoying life until retirement, only to find that physical restrictions limit what is possible. So rather than wait until 65 to travel the world, why not do some travel 20 or 30 years earlier, accepting that the home loan won’t be paid off quite so quickly, but that’s okay because you’ll be earning for longer.
There appears scope to better pace our working lives. Less hare and more tortoise.


Encore careers

In our teenage years we’re asked to choose a career path. We study and train, and for most part stay within our career lanes from that point forward. But if our working lives extend to perhaps 50 years or more, is it reasonable to expect the choices made in our adolescence will serve us well for the entirety of that period? Add to this the speed of change we now face, and the need for career flexibility and evolution becomes clear.
Longer working lives might make it more viable to take a year or two out of the paid workforce and retrain in a completely different field. Or perhaps try your hand at starting a business. As with the opportunities for career breaks, a year or two of little or no income is perhaps not disastrous if it means you can continue to produce income for an additional 10 years later in life.

Our ability to live longer and heathier lives is one of the greatest achievements of humanity.
How we fill those lives has perhaps not yet adapted sufficiently. Re-thinking the idea of retirement is both necessary and liberating. Longer lives provide the opportunity for greater choice and variety in life. It’s time to embrace that opportunity.

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