Maybe it is because I am on vacation in a resort-type setting but retirement has been on my mind. Not my retirement but the concept of retirement. While hanging out at the pool with a cocktail or playing tennis at 10:00am, it is hard not to imagine what it would be like to do this full time. I suspect my imagination is contrary to the typical view of retirement which is shaped so much by the culture of Corporate America, heavy marketing on the part of investment houses and government policy.
Consider Corporate America. Working in any company, from the CEO on down, requires subsuming some of our individuality to the interests of the organization. Partly as consequence of this stressful repression of individuality, many in Corporate America work for what they view as freedom: retirement. The nirvana that, when the magical age is reached, means the financial freedom and time for the full expression of individuality. The benefits department doesn't help. They constantly prod us to save more for retirement through the 401(k) plan. They often provide us with retirement planning software and access to investment advisers that all encourage a mindset around saving for this retirement event.
Financial firms, which have an interest in getting their hands on our money, reinforce the retirement event view. In their commercials, they promise that if you follow their advice, invest in their products and regularly sock away money, you too can wile away hours viewing your wine collection, throwing your grandchildren up in the air and walking on the beach with your well-preserved spouse.
Our societal norms encourage the concept of working until a specified point and then - not working. We have laws against age discrimination but our employment system invariably creates older workers who cost more than their ability to produce. Performance management programs and pay systems (in practice, not in principle) encourage promotions and pay increases that start to outweigh productivity gains by the time an individual hits the late 40's and early 50's. Defined benefit plans with their back loaded costs are three to four times more expensive for an employee in their 50's than those in the 30's; our approach to underwriting health costs results in higher costs for older employers and vacation and time off with pay for sickness almost always increase with an employee's service (age).
Our Social Security system which defines retirement as age 65-67 (depending on when you were born) reinforces the work-until-you-RETIRE mindset. When Social security was enacted in the 1930's, the life expectancy at birth for a male was in the low to mid 60's range. You retired from work, got a couple of years of social security benefits and then died. Now, with life expectancies in the 80 range, people feel entitled to get a life annuity for 15 to 20 years after they stop working.
I started rethinking my view on the merits of a classical retirement some years ago. I struck up a conversation with a fellow golfer at Hilton Head Island. He described his success as an oil executive that allowed him to retire at 50 to a beautiful property right on the golf course we were playing on and that allowed him the time and money to play every day. Being new to the area, I asked him which were the best courses to play on the Island. His reply has stuck with me ever since: "I don't know. I live right next to this course, so I've never seen the need to play on any course other than this one". That lifeless response scared me off of the life-of-leisure picture of retirement when I was in my early 30's. Setting and working to achieve goals, whether they be to make more money for ourselves or to help others to achieve their goals is one of life's great pleasures. Working towards a goal of no goals seems like a recipe for disappointment.
My view is also shaped by observing the most financially successful self-made individuals - people like Warren Buffet, Carl Icahn, Donald Trump, Bill Gates and Mark Cuban. I do not get the impression that they are working towards the goal of not working - kicking back and playing some golf and watching the world go by. They are creating new challenges for themselves long after they found financial security.
Even if your goal is a classical retirement, I do not believe we have the ability to financially plan for a 20 to 30 year retirement period that commences 20 or more years in the future with any sense of confidence. In "The Black Swan: The Impact of the Highly Improbable", Nassim Nicholas Taleb makes the point that we are so biased in forecasting future events by the past that we completely under-estimate how events are shaped by the improbable or rare events. The carefully laid financial plan, with indexed mutual funds, life insurance and a generation skipping will can be thrown to pieces by a paralyzing car accident, a close relative in need, or, on the positive side by a windfall inheritance. While rare events are by their nature - rare, over a long period of time, a rare event of one kind or another is likely to occur.
So am I saying that we should all throw up our hands and stop saving for an event that will not give us much satisfaction anyway. Partly. As a society and as individuals, I think we would benefit by moving the needle away from the retirement event concept. A prudent person will put aside money for a rainy day and to improve their flexibility to set non-financial goals in the future. But we should all understand that our financial plans will never materialize as anticipated and in any event, a period of leisure without work will ultimately be disappointing. As a society, we should not be encouraging those individuals with the most experience, expertise and judgement to drop out of the workforce.
