The Future of Retirement

Posted on April 30, 2010

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Traditional notions of retirement are changingAh, retirement. One day in the somewhat distant future, you’ll get that gold watch from your employer of many years and happily ride off into the sunset, play several rounds of golf each day, focus on hobbies and play with the grandkids.

Or not.

A blog post this week over at CBS MoneyWatch tells the story of an unemployed – not retired, mind you, but rather unemployed – 83 year-old woman. Gloria Davis, out of work for a year, recently decided to scrap her job search and go into business for herself. The blog post describes someone who is working because she wants to continue to contribute and make a difference.

Clearly notions of retirement are changing, and for good reason – we are living longer, healthier lives while, at the same time, many people work in professions that aren’t very physically demanding (retiring at 65 after years spent in a field or a mine or a factory floor might make sense; retiring at 65 after decades of sitting at a desk, one could argue, might not make as much sense).

But according to an article in USA Today, those who would like to leave the workforce earlier rather than later, and are counting on a 401(k) plan to fund that dream, may have to wait a while. The article notes that many 401(k) investors are close to being back to where they were before the markets collapsed. On the other hand, many workers don’t fully grasp the amount of money they will need to retire:

A 401(k) plan has an intrinsic problem. It tries to reach a specific goal — the amount you need to retire — by investing in stocks, bonds and money market funds, none of which offer specific returns. In essence, a 401(k) takes the task of a highly paid pension manager and gives it to each worker.

My own opinion is that while there certainly will be improvements to 401(k) plans and other retirement investment vehicles in the coming decades, the very notion of retirement is going to change radically. I think it’s entirely possible that many people will be working into their 70s and maybe many even into their 80s. While some will do so because they have little choice, many will do so because they want to. In the words of 83 year-old Gloria Davis, “how long can you travel, how many times can you golf?”