Baby boomers have already begun their transition into retirement, with many already over age 65. Age 65 became the official retirement age in the days of Franklin D. Roosevelt. Prior to that, most people worked beyond age 65. In 1880, 78 percent of men stayed on the job beyond 65. By 1990, this percentage decreased to only 30 percent.
Seniors today are capable of working well beyond 65 in part due to the changing nature of work. Rather than the typical physically demanding jobs of the past, many baby boomers are knowledge workers who use their mind rather than their back. As a result, they have the potential for many productive years beyond age 65. Here’s how the retirement landscape has changed in recent years:
New savings guidelines. Everyone knows the importance of saving for retirement, but guidelines on exactly how much to save have varied. Assumptions about the economy’s rate of growth and average return on investments that held true in the past have come into question. Fluctuations and uncertainty are becoming the norm. At a minimum, we all want to have enough saved to live comfortably and not worry about debt. Fidelity Investments recently recommended that workers save at least eight times their annual salary to meet basic income needs in retirement. At this savings level, by age 67 most workers will have approximately 85 percent of their pre-retirement income to live off of during their retired days.
Retirees moving to cooler destinations. Some retirees have historically opted for the warmer climates found in places such as Arizona and Florida to live out their retirement. However, many seniors these days prefer areas where they can live with four distinct seasons. The cooler climates of Maine, Washington, and Montana are attracting some retirees, sometimes with the added benefit of a lower cost of living and lower tax rates. And should retirees find themselves severely lacking in sunshine, a trip to a beach or tropical island may suffice.
Retirement is not necessarily all or nothing. Some people retire and then discover they miss something about the working world to the extent that they wish to go back. Whether the same job entices them back or something entirely different stirs their imagination, the companionship, interaction, and stimulation offered at work is difficult to replace. Some retirees also prefer to go back and forth between periods of work and leisure. A mix of work and play is now often preferred to an indefinite vacation.
Changing population mix. For every retirement-age person there are currently nine working-age citizens between the ages of 15 and 64. These are the people whose earnings provide the tax base and support for those no longer working. By 2050, this ratio will shrink to five working citizens for every retiree, according to United Nations data. In China the ratio will decrease from the present nine to one to three to one. And in Japan the ratio will be closer to one to one. Such drastic changes in the old-age support ratio will impact the solvency of Social Security, pensions, and public health.
Dave Bernard is the author of Are You Just Existing and Calling it a Life?, which offers guidelines to discover your personal passion and live a life of purpose. Not yet retired, Dave has begun his due diligence to plan for a fulfilling retirement. With a focus on the non-financial aspects of retiring, he shares his discoveries and insights on his blog Retirement–Only the Beginning.