The Peters Township Source

Some people aren’t in as big a hurry to fully retire as they were in their younger years. For them, continuing to work, whether full-time, part-time, or in a new career, is part of staying healthy and active.

It wasn’t so long ago that, to most people, retirement was a kind of a finish line, a few years of well-deserved rest following a lifetime of hard work. You spent decades laboring for your company, then, if you managed to live long enough, you were rewarded with Social Security and perhaps a company pension for the handful of years you had left before you died.

In the 21st century, though, that concept has become as outdated as the cigarette holder FDR puffed from after signing the Social Security Act in 1935. Far from a finish line, retirement today is often considered a second beginning, a chance to throw off the shackles of the 40-plus-hour workweek and start really enjoying life.

At least that’s the dream. For some it will become a reality, while others will find themselves working through their golden years, whether by choice or circumstance.

To start, the current definition of retirement is somewhat fuzzy. For much of American history, the average lifespan was somewhere between 35 and 45 years, not leaving much room for the typical person to enjoy any kind of retirement. Seventy years ago, when Social Security was created, the average white male lived to be about 60, the average white female around 65. Many people simply worked until they died. For some who outlived their jobs, retirement was a kind of pit stop before the cemetery. But in the late 1940s, American began living longer, healthier lives, and the idea of what the post-working years could mean slowly began to change.

People had more time to enjoy their retirements, and thanks to pensions and Social Security, a little bit of money to spend along the way. Then, around 1985, things began to change again. For the first time in decades, more people over 65 were staying in the workforce. It’s a trend that’s grown since then. Today, census data indicates that one in four people between 65 and 74 years old remain in the work force.

There are several explanations.

First, company-sponsored retirement benefits have diminished over the years, leaving more retirees to fend for themselves. The Washington Post reports that the number of private sector workers eligible for employer-sponsored retirement plans has dropped from 52 percent to 43 percent since 2000. Similarly, post-retirement health benefits have dwindled, forcing many older Americans to continue working simply to retain their healthcare plans.

“Retirement was once viewed as a three-legged stool propped up by Social Security, a pension, and personal savings,” says Phil Henry, of Henry Wealth Planning in South Fayette. “That model disappeared with much of America’s industry. Today, personal savings, in the form of IRAs and 401Ks, comprise three-fourths of a retirement plan, while Social Security might be one-fourth.”

Second, people are simply living longer. The average American lifespan is more than 75 years today. Longer lives with less guaranteed retirement benefits often means financial strain for those who don’t have adequately funded 401Ks or IRAs. Even those who have put some of their own money aside can feel the pinch, as evidenced by all the retirements that got postponed after the dot com bubble burst in 2000. Stock-heavy retirement portfolios that seemed more-than-ready to fund a golden retirement suddenly looked average, at best. Longer lives also mean a greater risk of inflation eating away at one’s retirement savings.

“If you go back to my grandparents’ generation, on average they would enjoy a seven-year retirement,” Henry says. “Now retirement can easily span 25 years or more, so you really have to be concerned about not only preserving your principal in retirement, but getting some growth to keep pace with inflation.”

People working later in life isn’t all bad news, though. A third factor that shouldn’t be overlooked is people who simply enjoy working. Whether continuing full-bore in their careers, taking a reduced role, or even starting their own businesses (see story, page XX), today’s retirement-age Americans are healthier and more vibrant than any generation of seniors in history.

“I see a lot of people who say, ‘How many rounds of golf do you play?’” says Bob Smith, of Southpointe Financial Services in Cecil. “When you’re in your 30s and 40s, you talk about retiring earlier than 65, but once we get into our ’50s and ’60s, the talk is about retiring later. There are some uncertainties, but I think some people aren’t in as big a hurry to fully retire as they were in their younger years. For them, continuing to work, whether full-time, part-time, or in a new career, is part of staying healthy and active.”

Henry defines retirement as the point in life at which a person is financially independent. What you choose to do after that point is an individual decision. “Corporate types tend to opt out of work,” he says, “but those with an entrepreneurial bug have a harder time putting the saw down. Either way, it’s always nice when work becomes an optional thing.”

The key is getting to that point. With a successful retirement so dependent upon individual planning these days, any expert will tell you that the sooner you start preparing, the better. Any financial planner can tell you horror stories about the person who comes into their office saying he expects to retire soon but hasn’t saved a cent. Often there’s no easy answer.

“For the most part, our client base consists of business owners and professionals who have been able to save money,” Smith says, “but I’ve talked to people on the other end of that spectrum who, for whatever reason, haven’t been able to save or have ignored the issue and come in and show me a few IRAs and no pension, and say we want to retire in five years or less. In the worst case I tell them there’s nothing you can do.”