“Unlearn what you have learned, you must!” — Yoda
It’s a nice thought. We work hard, live to the age of 65 and then we spend the “golden age” enjoying our lives, traveling, spending time with the family, basically enjoying the fruits of our labor. But the concept is broken. And chances are you will never retire at all.
Here is why you should not spend your life waiting for that golden age, some boring statistics and what you should do instead.
How it all began.
It’s the 19th century. Otto von Bismarck, German chancellor, announces that anyone over the age of 65 was forced to retire and that the state will take care of them from then on.
While concepts like this had existed in the past long before — soldiers in the military of the Roman empire were provided pensions for example — this was the first time that a general retirement program was introduced.
Franklin D. Roosevelt, as a result of the Great Depression, proposed the Social Security Act in 1935.
Life expectancy was 61.7 years back then.
It’s the present day and things have changed quite radically.
With the achievements of modern medicine, the population grows older and older. We live longer than ever before and reach higher ages in a healthy state.
The average woman in Europe lives to the age of 82. Men average in at 78.
In the U.S. that’s about the same.
Here come the boring statistics to get us all on the same page:
It’s quite easy to see that the part of the population that is above 75 years of age is constantly increasing.
That also means that the shrinking part of the working population has to take care of more and more retired people.
The concept of retirement used to work well. It doesn’t anymore.
When retirement above 65 was introduced, the average person never even reached the age to retire. Therefore it was a system that was easy to sustain.
But the times have changed and this once well-working system won’t work when most of us reach the age to retire.
Inflation is your enemy.
I live in Switzerland now but originally I am from Austria. The average pension per person and month is 1.200€ there. That’s around 1330$ at the time of this writing as a reference.
By the time I reach the retirement age inflation will have eaten away half of the buying power of those 1.200€.
And that’s not factoring in that the average inflation is probably way higher than the official 2%.
That means that factoring in what money can buy then, it would be as if I had to live on 600€/665$ a month now. Keeping the same standard of living would simply be impossible.
Spinning this idea further, if there are more retirees, there’s even less money per person available. So you probably won’t even get the 600€ equivalent. It’s probably more like 400€ then. That’s currently the average rent of a 30m² apartment in the town I was born in. With no money left to buy food or clothing or anything else.
Things grow even worse when you own a house, a car, everything that increases your monthly expenses basically.
The car needs repairs, so does your house, etc.
Oh and food… Yeah, having something to eat from time to time isn’t the worst thing in the world.
So basically, if we intend to live on our state’s retirement, we’re pretty much screwed. But that’s what most people do.
69% of all Americans have had less than 1,000$ in their savings account in 2016. That’s more than two thirds. Let that sink in. Sounds bad? How about: In 2018 the average American was 38,000$ in debt. Excluding house mortgages.
Do you still believe that someone will pay the money for you to retire and keep your standard of living?
We must unlearn what we have learned.
It’s easy to mistake the retirement to be the safe haven we arrive at the end of our working lives. After all, it has worked well for our grandparents and parents who already are retired.
Chances are that with the amount of money they are getting, they are doing very well actually.
We see that they are well off and we believe that the state will take care of us the same way it does with our elders now.
But it won’t. Because it can’t.
So what can we do?
We need to unlearn what we have learned from our parents and grandparents about how to structure life.
Life isn’t this straight line which it used to be in the past anymore. When our grandparents got a job, it was for life basically. You quit when you retired. Or when you died. Nowadays it’s much more likely to have several careers in several jobs and maybe even several fields.
Life is changing and we have to adapt to that change if we don’t want to be left behind. That also means that we have to quit relying on a system that was designed to work a hundred years ago.
The economy, medicine, careers. They all have changed enormously in the past century. Retirement should be no different.
“Many of the truths that we cling to depend on our point of view.” — Yoda
For our parents and grandparents, their truth was that they will retire without many thoughts about existential troubles. And they were correct.
We can cling to that truth and depend on the hope that somehow someone will figure something out. Or we can simply change our point of view and rethink the concept of retiring.
If I own a garden and I want a shady place to take a nap after lunch, then I am not going to plant one tree and wait for decades for it to grow tall enough, will I? I will much rather plant a few smaller ones instead.
And that’s how we should retire in the 21st century.
Why should we wait until we are 65 years old to start doing what we truly enjoy? Why shouldn’t we split up the retirement into smaller parts and retire several times *during* our working lives?
We run on those few weeks of holiday each year and push the multi-month travel around the world further and further into the distance when we’ve finally “got time for it”.
But the time for something is when you make it. There is no external force telling you when you can or cannot do something. It’s all up to our own planning and decision-making. And that’s taking place in our heads and nowhere else.
There are so many benefits to this concept over the old one.
- Your work will be more productive when you come back from your partial retirement.
- You make goals for your savings and spend your money on things that truly matter to you instead of buying dumb stuff you don’t need.
- You get to do the things you wanted to do sooner.
- And most importantly:
You get to do the things you wanted to do at all.
We have to face the fact that some of us are not going to live to be 66 years old. If you’ve always delayed that thing you always wanted to do to when you’re retired, but you never even get there at all… well… you missed out on it. And nothing is worse in life, then missing out on living the life you want.
Plan and execute.
Think about what you want to do when you’re retired. Now plan it for next year. If you need more time for preparation or more money, plan it for the one after that, but don’t push it off 10, 20 or 30 years.
Many people spend their lives working and working and when they finally reach their retirement age, they are surprised by how much time they have all of a sudden and don’t know what to do with it.
Boredom is one of the most destructive forces to our health. That’s why so many people get sick very shortly after retirement. Their work was their purpose. Now their purpose is gone. All of a sudden they are in this hole of irrelevance and have nothing to give meaning to their existence. So their bodies start to shut down.
Plan ahead. Don’t think that the state will take care of you because it can’t. Invest your money wisely so you have some passive income when you’re old. Buy stocks that pay dividends or buy flats that you can rent out. Spend the money you earn on things that generate more income for you. Don’t spend it on stuff that you don’t need. Because the stuff that you don’t need will only increase your expenses further.
Every single Dollar, Euro or Swiss Frank you own can either be your friend or your enemy, depending on how you spend it.
So spend wisely, enjoy your life and don’t wait until you’re old and sick to look back on the things you never dared to do.
Have a great day and thank you for reading.
I’d love to hear from you. And I invite you to leave your opinion in the comments below? Let’s get this discussion started so we can all learn, grow and advance together.
(Oh and to get the legal stuff right: I am not a financial advisor, these are my own thoughts and for entertainment purposes only. If you need financial advice ask a professional for help. Medium is not a good place to look for them.)