Retirement at 65? But it's the new 45!
In 1935, when the Social Security Act was passed by Congress and signed by President Roosevelt, the new law established a national retirement age of 65. At that age, people could begin receiving Social Security benefits and, in the minds of generations of Americans since, effectively set the psychological 鈥渞etirement鈥� age.
There鈥檚 an important fact to consider, though, that鈥檚 been left out of this story. In 1935, the . You had to exceed the average American lifespan by more than three years to begin receiving Social Security benefits.
Let鈥檚 roll forward to today. The 鈥渞etirement age鈥� set by Social Security is still 65. However, today the is 78 years and continuing to rise.
In other words, the national 鈥渞etirement age鈥� of 65 has remained unchanged for 75 years, but the lifespan of the average American has gone up by 16 years.
Yes, this is an easy explanation for why Social Security is seeing financial problems, but there鈥檚 a more vital issue at work here, one that we鈥檙e seeing at work all over the place in America.
40 is the new 20. 60 is the new 40. Simply put, people are living far longer and enjoying excellent health much later in life than ever before.
In 1935, a person aged 65 was often quite elderly and in poor health. In 2011, a person aged 65 is often full of vitality and has two more decades of lively activity ahead of them (at least).
There are two key points to pull out of this.
First, if you鈥檙e under 50 or so, you鈥檙e probably not going to be able to retire when you鈥檙e 65. In the past, Social Security could sustain you by providing enough income between the age of 65 and the end of your life that you could survive. Unfortunately, as lives grow longer and future generations grow smaller in size, one of two things will eventually have to happen: either the Social Security age will move back or the amount of benefits will fall.
That means that either you鈥檙e going to be going on full Social Security benefits at a later age than 65 or Social Security benefits are not going to be enough to sustain you in retirement at all. In either case, retirement at 65 simply because Social Security is now available is quickly becoming a myth 鈥� and will completely become a myth in a decade or two.
At the same time, however, 65 is the new 45. Over the last 75 years, the quality of life for people over the age of 65 has increased drastically. Rather than beginning to lose control of their faculties, most people between the ages of 65 and, say, 80 are quite valuable and have a ton to offer in the workplace and in the marketplace.
Simply put, at the same time that retiring at age 65 is becoming less feasible because of longer lifespans and demographic shifts, it鈥檚 becoming much more worthwhile to continue being productive at 65.
What does this mean for retirement planning?
At this point, I don鈥檛 view retirement planning as saving for true retirement. Most retirement savings plans allow you to begin taking money out at age 60, which means you likely have a quarter of a century of good health ahead of you at that point.
Instead, I look at retirement planning as building a backbone for a second career. At age 65, I won鈥檛 have enough retirement savings or Social Security income to fully sustain me for the rest of my life, but I will have enough retirement income to make it possible to take some significant career risks. I can take a low-paying position with a charity or even do volunteer positions with some perks. I could retreat for a year and write the novel I鈥檝e always wanted to write. I can take a very low-stress job as a greeter or a position on a community board that gives a stipend.
These are all things that are difficult to do right now in my life, yet sound appealing to me and have a firm place on my to-do list.
Simply put, my retirement savings aren鈥檛 just for retirement; instead, they create possibilities for a second career or other opportunities later on during my healthy adult life.
Don鈥檛 fear the changes coming in retirement savings. Embrace them for the opportunity that they are.
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